MANAGEMENT

REPORT

JBS2014

Mensage
From the MANAGEMENT
JBS had great victories and achievements in 2014. We continued to harvest from the transformational movements that we performed in the last few years in
order to transform our Company into a multinational of Brazilian origin. We feel certain that the timing of the relevant investments made by us could not have
been better or more opportunistic. Today, these investments bring excellent results to our Company. We are confident that we built a unique global
production platform, efficient and well positioned in countries that provide the most competitive environment to produce food products.
We reached more than R$120 billion in consolidated net sales in 2014, an increase of 30% compared with 2013. This made us the largest Brazilian private
company in terms of revenues. In 2014, we were also ranked as the second largest food company in the whole world. Our EBITDA was R$11.1 billion,
which represents an increase of 81% over the previous year, with an EBITDA margin of 9.2%. Our net income came in at R$2.0 billion, also presenting an
impressive improvement of 120% over 2013. In addition, we evolved in our cash generation from operations, which reached R$9.0 billion, and in free cash
generation, after investments, of R$4.7 billion.
In the United States we have a well adjusted operation where we had an expressive result during last year. Pilgrims Pride, our chicken business in the US,
performed really well in 2014, as a result of a management committed to reduced production costs, high levels of productivity and rationalization of its sales
mix. Net revenue for this business was US$8.6 billion, with an EBITDA of US$1.35 billion, representing a margin of 15.7%. In Mexico, where we already
have operations, we announced the acquisition of the Tysons assets there, which is still pending approval from local authorities. This transaction, when
approved, will practically double our production capacity in that country.
We reorganized our beef operation in the US, splitting the management of fed cattle from the regional business which is more focused on the processing of
cows and Holsteins. This strategy allowed us to have more agility and focus on the decision making process and flexibility to adapt to ever changing market
conditions. Net revenues from this business unit, including operations in Canada and Australia, surpassed US$21.6 billion, with EBITDA of US$916.1
million, which represents a margin of 4.2%. In our pork unit, we posted US$3.8 billion in revenues, with an EBITDA margin of 10.6%, the best result in the
pork industry in the US.
We increased our Sales to Asia, a growing market in terms of consumption of meats, through our Australian operation, which presented an excellent
performance during last year. Australia is a strategic region for food production in a global context and we decided to expand our operation there through
the acquisition of the Primo Smallgoods Group, a leading company in the prepared and convenience meat category.
We achieved satisfactory results at the JBS Foods unit, one year after its creation. During this period, we implemented the necessary operational
adjustments. We captured synergies, reformulated products, launched new products and initiated a broad marketing campaign, focusing on the Seara
brand, with an emphasis on healthy products of superior quality, offering convenience and practicality to consumers. In the year, sales from JBS Foods
reached R$12.9 billion and EBITDA surpassed R$2.05 billion, with a margin of 15.9%.

At JBS Mercosul, we expanded our customer base in Brazil as well as overseas and continued with our strategy of promoting the Friboi brand locally.
Currently, we have a very well structured and competitive production platform in Brazil. In the other Mercosul countries where we operate, we have seen
herd growth in Paraguay, with good perspectives to increase our participation in that market. Results from Uruguay have been very positive and the country
enjoys privileged access to several markets. In Argentina, we stabilized our operations and significantly increased our market share of branded value added
products. Last year, the JBS Mercosul business unit posted net revenues of R$ 26.2 billion and an EBITDA of R$ 2.32 billion, with a margin of 8.9%.
In 2014, our global exports totaled US$16.2 billion, representing a growth of 38% in comparison to 2013. Our export sales confirm our ability to access
100% of the worlds consumer markets and show consistent growth due to increased demand from emerging economies, particularly in Asia.
We reduced our leverage (net debt/EBITDA) from 3.7x at the end of 2013 to 2.1x as of December, 2014. We remain focused on deleveraging our company,
aiming for a better perception of the companys risk profile and consequently a reduction in financial costs. In addition, we continue to maintain comfortable
liquidity and a strong cash position, in addition to a well-structured hedge position that protects us from foreign exchange variation.
In the macroeconomic scenario, we observed a consistent recovery of the American economy through our US operations. The reduction in the cost of
energy and a consequent improvement in disposable income of Americans households should positively influence protein consumption in that market. We
believe that this dynamic will be extremely beneficial to our business.
We feel confident that the market has an increasing better perception of our business and our strategy. Our results for 2014 show that we are going in the
right direction. In 2015, we will prioritize organic growth and focus on all aspects of improving our financial metrics, thus creating incremental value for our
shareholders.
We thank all of our partners, suppliers, customers, investors and stakeholders for their trust and support in JBS. I would like to especially thank each and
every one of our more than 215 thousand team members, ambassadors to our culture and our values. It is only through our team that we were able to get
here and it is with them that we will be able to maintain our sustainable growth into the future.

Wesley Batista
JBS Global CEO

We reached more

than R$120
billion in sales an increase of
30% compared with 2013. This made us
the largest Brazilian private
company in terms of revenues.

JBS

Corporate Profile
JBS S.A. is a food company with more than 61years of tradition and a global leader in the processing of animal protein. Present
in more than 20 countries, the Company has more than 300,000 customers in more than 150 countries through a diverse
portfolio of products and brands.
Headquartered in Brazil, JBS employs more than 216,000 people throughout its production platforms and sales offices. The
operational structure includes beef, pork, lamb, poultry and hides/leather processing facilities, in addition to feedlots.
JBS main clients are wholesales and retailers chains, foodservice restaurants, hotels, catering and others.
In addition to the Food Sector, JBS is present in the segments of Personal Hygiene and Cleaning Products, Collagen, Can
Making, Sausage Casings, Biodiesel, Vegetables, Transports, Waste Management and Recycling.
The businesses are divided in five units, as follows:

Businesses Units
JBS Mercosul
Core business: beef and hides/leather processing, and related businesses: biodiesel, collagen, personal hygiene and cleaning
products, and others in Brazil.
Countries where it is present: Brazil, Argentina, Paraguay and Uruguay. Hides/Leather operations of JBS Mercosul have, in
addition, presence in Vietnam, China, Mexico and Germany.
Main brands: Friboi, Swift, Swift Black, Cabaa Las Lilas, Armour, Plate, among others.
JBS Foods
Core business: poultry and pork processing and production of prepared products.
Countries where it is present: Brazil.
Main brands: Seara, Rezende, Confiana, Turma da Mnica, LeBon, Excelsior, Wilson, Tekitos, Hot Hit, Texas Burger and
Pena Branca.
JBS USA Beef
Core business: beef, lamb and hides/leather processing, transportation and trading.
Countries where it is present: Australia, Canada and the US.
Main brands: Aspen Ridge, 1855, 5star, Cedar River Farms, Swift, Swift Premium
Aves JBS USA (Pilgrims Pride)
Core business: poultry processing.
Countries where it is present: the United States, Mexico and Puerto Rico.
Main brands: Pilgrims Pride, Pierce Chicken, Wing Dings, Gold Kist Farms and Country Pride.
Sunos JBS USA
Core business: pork processing.
Countries where it is present: the United States.
Main brands: Swift Premium, Swift 1855 and La Herencia.

PG.

Investments and Corporate Event

In 2014, JBS has made important investments that add value to its portfolio of products and operational structure.
On January 23th, 2014, JBS, through its indirect subsidiary JBS Aves Ltda. (JBS Aves), celebrated an agreement for the
Purchase and Sale of Equity Interests and Other Covenants, where the terms and conditions were established for the
acquisition of 100% of total shares representing the capital stock of Frinal S.A. Frigorfico e Integrao Agrcola (Frinal). The
total price to be paid by JBS Aves to the sellers is R$103,500,000.00. The Brazilian Antitrust authority (CADE) approved the
operation on April 3rd, 2014 and the closing of this acquisition occurred on April 23rd, 2014. Frinal was headquartered in the city
of Garibaldi, State of Rio Grande do Sul, and had as mais activities the breeding, slaughter, processing and commercialization
of birds and one day chicks. On August 1st, 2014, Frinal was incorporated into JBS Aves, which became its successor for all
legal purposes.
On March 6th, 2014, JBS, through JBS Aves, celebrated an agreement for the Purchase and Sale of Equity Interests and Other
Covenants, where the terms and conditions were established for the acquisition of 100% of total shares representing the capital
stock of Sul Valle Alimentos Ltda. (Sul Valle). The total price to be paid by JBS Aves to the sellers is R$24,000,000. Sul Valle
was founded on September 27th, 2006, and is headquartered in the city of So Miguel do Oeste, State of Santa Catarina. Sul
Valle has as main activities the breeding, production and commercialization of hogs and pork.
On May 14th, 2014, JBS, through JBS Aves, celebrated an agreement for the Purchase and Sale of Equity Interests and Other
Covenants, where the terms and conditions were established for the acquisition of 100% of total shares representing the capital
stock of DBF Participaes Societrias Ltda. (DBF), owner of 100% of the capital stock of Avebom - Indstria de Alimentos
Ltda (Avebom). The total price to be paid by JBS Aves to sellers is R$105,000,000. CADE approved this transaction on July
21st, 2014 and the closing of this acquisition occurred on August 6th, 2014. DBF and Avebom were founded on September
21st, 2012 and in September 1st, 1998, respectively, and they both are headquartered in the cities of Londrina and Jaguapit,
respectively, State of Paran. DBF is a holding company and Avebom has as main activities the breeding, slaughter and
commercialization of birds.
On May 30th, 2014, JBS, through its subsidiary JBS Foods S.A. (JBS Foods), celebrated an agreement for the Purchase and
Sale of Equity Interests and Other Covenants of quotas representing the totality of the capital stock of Comrcio e Indstria de
Massas Alimentcias Massa Leve Ltda. and of real estate properties (Massa Leve). The total amount paid by JBS to the sellers
was R$258,617,503.16 of which R$203,531,014.00 were paid upon the delivery of 26,295,997 common shares, nominatives
and with no par value, issued by JBS and held in treasury (Shares). The Antitrust authority (CADE) approved the acquisition
by JBS of quotas representing the totality of Massa Leve on May 30th, 2014, and the delivery of the Shares as part of the
payment of the sale and purchase was approved by the CVM. Massa Leve was founded in 1992 and is located in the
municipality of Rio Grande da Serra in the state of Sao Paulo. Massa Leve is the leading fresh pasta producer and the third
largest in the ready-to-eat meals and sandwich category in Brazil and represents a relevant opportunity to capture synergies
when operated by JBS Foods, a wholly owned subsidiary of JBS SA.
On July 14th, 2014, JBS Foods, wholly owned by JBS S.A., through Seara Alimentos Ltda., signed a binding agreement with
Cu Azul Alimentos Ltda., and its related companies and individuals ("Cu Azul Group"), by which JBS Foods will acquire two
poultry processing plants, including two feed mills and three incubators, located in Guapiau and Itapetininga, both in the state
of So Paulo, with a combined processing capacity of 330,000 birds per day, and licenses to access the industry's global
importing markets. This acquisition represented an important step under JBS Foods' strategy to increase its presence in the
principal international markets, in addition to strengthening its position in Brazil's largest consumer center. Cu Azul Group was
founded in 1974 in the city of Pereiras, state of So Paulo, as a poultry producer operating under a fully integrated production
model, with well-known brands such as Cu Azul.
On July 21st, 2014, the public tender offer of common shares issued by Excelsior Alimentos S.A. for disposal of the controlling
shareholders, under a differentiated procedure was concluded. After the termination of the period for adhesion to the Tender
Offer, on July 21st, 2014, no adhesion by any shareholder of common shares of Excelsior under the Tender Offer was verified.
As a result, the shareholding structure of Excelsior remained unchanged.

PG.

Investments and Corporate Event (cont.)

On November 20th, 2014, JBS, through its wholly owned subsidiary JBS Foods S.A., through JBS Aves Ltda., entered into an
Agreement for the Purchase and Sale of Equity Interests with Condition Precedent and Other Covenants, by which conditions
were established for the acquisition of the quotas representing the totality of the capital stock of AMSE02 Participaes Ltda.
(AMSE02). The Transaction has the final purpose of acquiring the totality of equity interest of AMSE02 in the companies Big
Frango Indstria e Comrcio de Alimentos Ltda., Nutribig Administrao e Participaes Sociais S.A. e Agrcola Jandelle S.A.
(Big Frango Group and "Transaction", respectively). The totality of the capital interest in the Big Frango Group was acquired by
AMSE02 as a result of a debt restructuring process and corporate restructuring promoted by the former Big Frango`s quota
holders and shareholders, coordinated by Werte Capital Reestruturao e Intermediao Financeira Ltda.
CADE approved this transaction on January 14th, 2015 and its conclusion occurred on February 1st, 2015. The Big Frango
Group is one of the biggest groups in the poultry segment in southern Brazil, with more than 49 years of existence, which
slaughters 460 thousand birds per day, in two plants approved to export to the principal international markets, and annual
revenue of more than R$ 1 billion. In this sense, its acquisition represents an important step towards the strengthening of JBS
Foods in the Brazilian consumer market of poultry and related products.
JBS celebrated on November 20th, 2014, a definitive agreement to purchase 100% of the share capital of Primo Smallgoods
Group (Primo Group). This acquisition, approved in March 2015 by the Australian regulatory authorities, was conducted by
JBS Australia, a subsidiary of JBS S.A. The total amount to be paid is AU$1,450 million (Australian dollars, equivalent to
US$1,250 million) on cash and debt free basis. Established in 1985, Primo Group is the leading producer of ham, bacon and
smallgoods in Australia and New Zealand. It has a portfolio of well recognized and highly regarded brands including Primo
Smallgoods, Hans, Beehive, Hunter Valley Quality Meats and Primo Quality Meats. The business currently employs in excess
of 4,000 employees and operates from five manufacturing plants, seven distribution centers and 30 retail shops. Recognized by
its high quality standards, Primo Group operates state-of-the-art facilities. JBS anticipates incremental annual revenue of
approximately AU$1,600 million and EBITDA of AU$150 million as a result of the transaction. The Company expects to capture
around AU$30 million in synergies from this transaction, which will elevate projected EBITDA for 2015 to AU$180 million,
equivalent to an acquisition multiple of 8x EV/EBITDA post-synergies. This acquisition is strongly aligned with our global
strategy to expand our presence in the value-added product category and well-known brands. Primo Group is the leading
company in this segment with strong brands and represents an outstanding opportunity to expand our business in Australia,
considering the annual growth in consumption of prepared products and the prospects to increase exports of convenient
products from Primo Group portfolio commented Wesley Batista, Global CEO of JBS.
On July 28th, 2014, JBS, together with Pilgrims Pride Corporation (NASDAQ: PPC, PPC) announced that a definitive
agreement has been entered into for the entities to purchase the totality of the poultry businesses of Tyson Foods, Inc. (NYSE:
TSN) in Mexico and Brazil. The Mexican business was acquired through Pilgrims Pride, whose majority owner is JBS USA
Holdings, Inc., a wholly owned subsidiary of JBS S.A. The Brazilian business was acquired through JBS Foods S.A., also a
wholly owned subsidiary of JBS S.A. The transaction is valued at US$575 million, of which US$400 million represents the
Mexican transaction while the balance of US$175 million represents the value of the Brazilian purchase. The Mexican entity,
known as Tyson de Mxico, is a vertically integrated poultry business based in Gomez Palacio in North Central Mxico for more
than 20 years. It has three plants and employs more than 5,400 team members in its plants, offices and 7 distribution centers.
Pilgrims Pride Mexico anticipates incremental annual revenue of approximately US$650 million as a result of the transaction.
The acquisition in Brazil involves 3 fully integrated production plants, two in the state of Santa Catarina and one in the state of
Parana. Tyson do Brasil, which exists since 2008, employs 5,000 team members and is expected to generate annual revenues
of about US$350 million for JBS Foods. The acquisition of the poultry businesses of Tyson Foods, Inc. in Brazil was approved
by CADE on October 23th, 2014, the acquisition of Tyson de Mxico is pending regulatory approvals by the competent
authorities.

PG.

Investments and Corporate Event (cont.)

Considering the acquisitions previously mentioned and additioning investments in expansion and maintenance of processing
facilities, JBS recorded in 2014 a total CAPEX of R$4,276.8 million.

Investments in associate, subsidiaries and joint ventures

99%

JBS Embalagens
Metlicas Ltda.

100%

JBS Global
Investments

100%

JBS Leather Italia

S.R.L.

100%

JBS Holding
Internacional S.A.

100%

JBS S/A (DMCC

Branch)

99%

JBS Global Meat

S.A.

100%

100%

Columbus
Netherlands B.V.

Subsidiaries

100%

JBS Leather
Paraguay

JBS Holding
GMBH

100%

100%

Brazservice Wet
Leather S.A.

50%

JBS Slovakia
Holdings, s.r.o.

100%

100%

JBS Global
Luxembourg
S..r.l.

FG Holding
III Ltda.

98.83%

JBS Foods S.A.

21.12%

100%

JBS Confinamento
Ltda.

JBS USA, Inc.

97.5%

Vigor
Alimentos S.A.

Associates

100%

Tannery
do Brasil S.A.

Meat Snack
Partners, LLC

Joint Venture

Principal Shareholders in 12/31/2014

Shareholders
Controlling Shareholder (FB Participaes SA et al)

Number of Shares

1,210,305,341

41.12%

54,829,482

1.86%

- BNDES Participaes S.A. - BNDESPAR

723,780,418

24.59%

- Caixa Econmica Federal

296,392,500

10.07%

- Minority Stockholders

658,336,267

22.36%

Total Free Float

1,678,509,185

57.02%

TOTAL

2,943,644,008

100.00%

Treasury
Free Float

PG.

Human Capital
JBS believes that its employees are the main responsible for the Companys performance and growth, and, for this reason,
gives this public the opportunity to grow and develop in its the different areas.
JBS ended 2014 with more than 216,000 employees distributed throughout its production facilities and sales offices, according
to the following graph:
Canada
2,552

Mexico
14,505

Argentina Others
2,077 6,782

Australia
8,700

216,693
employees

Brazil
116,823

USA
65,254

JBS employees are those who carry and disseminate the Companys corporate culture, one of the fundamentals items that led
JBS to be the world leader in its sector. Knowing the high value of this assets, the Company invests in the developments and in
the continuous improvement of each employee through development programs. Focusing in retaining and enhancing its talents,
JBS offers to its employees several programs to their professional development and to engage them in its culture.
Management of Leadership
Responsible to create conditions to attract, retain and develop leaders with business acumen and in accordance with the Values
of JBS, the Company structured a corporate area of Leadership Management, responsible to bring knowledge and information
to JBS leadership.
Assessment of Individual Performance
JBS believes that the assessment of individual performance is an important tool to manage people, able to identify and measure
employees actions, in order to developed and accompany them in their functions. To assess the performance of its employees,
JBS uses a 360 valuation system, which aims to diagnose and analyze the different aspects of each employee, such as its
professional behavior, interpersonal relationship and the adherence of the employees skills with JBS way of be.
Personal Development
Aims to map the leaders that act in the organization, allowing to know deep the talents, the future successors and the
employees who need to develop or improve its performance.
JBS has as its one main competitive advantages the profound knowledge of its business, for this reason, it seeks to develop its
employees in all hierarchical levels, such as:
Internal Talent Program: focusing industrial facilities in Brazil and in the US, aiming to capacitate, develop and train the
potential employees to assume the position of production supervisors.

PG.

Human Capital (cont.)

Breakfast with Culture: a monthly gathering in So Paulo headquarter, for which all employees are invited. The speakers
are special guests (intern or external) and talk about themes that are relevant to the development of JBS employees.
Growing up: JBS Couros (Hides/Leather) offers courses of professional development and elementary to high school to its
employees. People who, before that, didnt know how to read and write were provided with formal education, and others, that
had abandoned its studies prematurely, were able to study again, improving their knowledge and allowing them to achieve
professional growth coupled with social development.
Trainees program: JBS has a trainee program which offers opportunities to young professionals and incentivizes the
formation of leaders, improving their technical and managing people knowledge. The participants have the chance to develop its
careers in the processing facilities or in the corporate sector. The program lasts one year and a half, when the trainee will
receive training to develop himself, in addition to participate in projects to improve the performance of the processing facilities
under the supervision of a senior employee.

Corporate Governance
JBS has a structure of corporate governance, created to improve its decision-making process and ensure respect to all
stakeholders. The companys shares are listed on the Novo Mercado Special Corporate Governance Listing Segment,
BM&FBovespas most rigorous level, and pursues to always be in compliance with the principles established by the Brazilian
Institute of Corporate Governance (IBGC) hereby ensuring value creation and sustainable business development.

JBS Corporate Governance Structure

JBSs governance structure defines investment strategies and monitors the company's relationship with shareholders and
stakeholders, thereby ensuring value creation and sustainable business development. This positioning is based on the
principles of transparency, fairness, accountability and corporate responsibility established by the Brazilian Institute of Corporate
Governance (IBGC).
Including the practices recommended by IBGC, JBS adopted: capital stock divided into common shares, granting voting rights to
all shareholders; Independent audit firm to analyze balance sheets and financial statements; Permanent Fiscal Council;
Summoning of shareholders meetings to resolve on the election, removal from office and term of office of the members of the
Board of Directors and Statutory Officers defined in the Bylaws; Transparency in the disclosure of the annual management
report; and Free access to information and the companys facilities to the members of the Board of Directors.
Independent
audit

Shareholders
meeting
Fiscal Council

Audit
Committee

Board of
Directors

Internal
audit

Ombudsman

Executive
Board

PG.

10

Corporate Governance (cont.)

Fiscal Council
The Fiscal Council is independent from the companys management and external auditors, serving as a permanent body with
powers and duties conferred by law. Composed by a minimum of three and a maximum of five members and their respective
alternate members, its main responsibilities include: to oversee the acts and documents issued by JBS management and the
Company itself, and, if necessary, to report errors, fraud or crimes to administration bodies and shareholders meetings. The
members of JBS Fiscal Council may be or not shareholders, and are elected and dismissed through the shareholders
meetings.
In December 31st, 2014, JBS Fiscal Council was composed by the following members:
FISCAL COUNCIL
Florisvaldo Caetano de Oliveira

Chairman of the Fiscal Council

Jos Paulo da Silva Filho

Member

Demetrius Nichele Macei

Member

Amoreti Franco Gibbon

Member

Sandro Domingues Raffai

Substitute

Adrion Lino Pires

Substitute

Marcos Godoy Brogiato

Substitute

Joaquim Dias de Castro

Substitute

Board of Directors
The Board of Directors is the highest organ of JBS corporate governance and reunites in a quarterly basis (or in special
sessions whenever necessary). The Board of Directors is composed by a minimum of five and a maximum of eleven members
and its members are elected by the ASM, which can remove them from office, as well.
In compliance with the company's bylaws, the main responsibilities of JBS Board of Directors (BoD) are: to establish policies
and general business guidelines and long-term strategy; to elect executive officers and remove them from office and establish
their duties; oversee the executive officers' management; to comment on the management report and management accounts;
and elect independent auditors and remove them from office, among other functions.

In December 31st, 2014, JBS Board of Director was composed by the following members:
BOARD OF DIRECTORS

Joesley Mendona Batista

Chairman

Wesley Mendona Batista

Vice-Chairman

Jos Batista Sobrinho

Member

Humberto Junqueira de Farias

Member

Joo Carlos Ferraz

Member

Carlos Alberto Caser

Independent Member

Tarek Mohamed Noshy Nasr Mohamed Farahat

Independent Member

Marcio Percival Alves Pinto

Member

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11

Corporate Governance (cont.)

STATUTORY EXECUTIVE BOARD
Responsible for the policies and guidelines established by the Board of Directors, the Statutory Executive Board is authorized to
practice all acts needed for the regular operation of the company.
The members of Statutory Executive Board are elected by the Board of Directors for a three-year term of office, who are eligible
for reelection.
In December 31st, 2014, JBS Statutory Executive Board was composed by the following members:
STATUTORY EXECUTIVE BOARD
Wesley Mendona Batista

CEO

Francisco de Assis e Silva

Institutional Relations Officer

Jeremiah Alphonsus OCallaghan

Investor Relations Officer

Eliseo Santiago Perez Fernandez

Administration and Control Officer

Board of Directors' Committees

With the function to support the Board of Directors and to make the Companys processes even more robusts, JBS has five
committees that act together with its management.
Innovation and Marketing Committee: created in July 2013 with the mission of creating value for the company's brands by
building its corporate image, portfolio and positioning of JBS different operating segments. It also monitors the companys
overall results and creates shareholder value by maximizing sales and profitable brands within JBS portfolio.
Sustainability Committee: was remodeled in 2013 to advise the Board of Directors with respect to the risks and opportunities
in sustainability initiatives. Accordingly, the committee is responsible for dealing with and connecting all topics related to the
company's business in a global perspective, including: identification, addressing and treatment of critical issues that result in
risks or business impact; monitoring and implementation of policies, strategies and specific initiatives; and evaluation of
proposals of investments in sustainability.
Audit Committee: advises the Board of Directors about the norms, rules and procedures for disclosure and transparency of
financial statements, being responsible also for evaluating the performance of internal control systems and internal and external
audits. In 2013, the Committee reviewed the work conducted by the internal audit team and approved the guidelines and action
plans for 2014, 2015 and 2016.
Financial and Risk Management Committee: this committee helps the Board of Directors and Executive Officers analyze the
impacts of the global economic scenario on JBS financial policy. In 2013, the Committee changed the risk management policy,
improving rules and procedures for the control and management of market and credit risks. The aim was to reduce the risk of
fluctuation in prices and create value for shareholders, in addition to mitigate other risks that the company is exposed to due to
the regular course of its business.
Personnel Management Committee: proposes criteria for performance evaluation, compensation and meritocracy at all
hierarchical levels of JBS. It also analyzes candidates to the Board of Directors , considering professional experience, expertise
and economic, social and cultural representativeness.

PG.

12

Sustainability
JBS has a strong commitment to the environment and in the efficient use of natural resources. In practice, this commitment
manifests itself through three ways:
The first one is the establishment of goals and daily monitoring of environmental indicators.; the second reflects the annual
investment plan for the environmental improvements, where are defined the investments and projects, and the engagement of
employees and suppliers in the corresponding themes and sensitive to that question. The third one regards the supply chain,
which must be in total compliance with the policies and criteria established by the Company. To ensure a raw material purchase
100% responsible, JBS use contractual mechanisms and performs the social environment monitoring of farms that supplies
cattle to JBS, through modern geospatial technologies, based on satellite images and maps of the properties.
JBS has been achieving important advances in sustainable management of its supply chain, supporting projects and testing
new models of production, in order to be more sustainable.

A highlight of this process is the Program New Field, that promotes sustainable production practices in cattle farms in the
Amazon. The goal of this program is to increase its productivity and enhance the local economy, to reduce the deforestation, in
addition to preserve and recover the natural resources. This new productive model was tested in 2013 in 14 pilot farms in the
Integrated Low Carbon Cattle Farming project in Alta Floresta and Cotriguau (MT), leaded by the NGO Instituto Centro de Vida
with the financial support of Fundao Moore, Fundo Vale, FSP through Working Group on Sustainable Beef and the support of
several partners, as the Rural Union of Alta Floresta, EMBPRA and JBS.
JBS Beef Brazil has an annual investment plan to improve the environment, focusing on the treatment of effluents, on the
management of solid waste, on the atmospheric emissions and greenhouse gases and on the management of water use. This
plan was based on a wide environmental diagnose performed by the Company in 2010, to identify opportunities to improve the
environmental indicators of beef processing facilities in Brazil. This investment plan is annually updated since 2011 and has
more than 360 projects concluded, totaling an amount of more than R$42.8 million in investments. In addition, in 2014, JBS
Beef Brazil invested more than R$36 million in environmental management and in projects of improvements in order to reduce
water and energy consumption, energy efficiency, effluents treatment, energy reuse of waste, and others.
In addition, since 2009, JBS measures and disclose direct and indirect emissions of Greenhouse Gases related to its operations
in Brazil. From 2012, the Company started to measure and disclose its emissions in a global scale, comprising all of its
operations in the world. The Company also participates in others voluntary initiatives regarding the report of information related
to Greenhouse Gases emissions and related to the management and strategy regarding climate changes, as the Driving
Sustainable Economies in the module of Climate Changes, and the Carbon Efficient Index (ICO2) from BM&FBOVESPA.
JBS also participates in Technical Working Group from the Brazilian Program GHG Protocol, which aims to deepen the
discussions and the development of auxiliary tools to the measurement of GHG emissions in the value chain. In 2014, JBS
contributed to the development of Agricultural GHG Protocol, which aims to make available a specific tool adapted to the
measurement of GEG emissions in agricultural activities in Brazil. In 2015, JBS will support the work of partners as WRI in the
training and field tests of this tool.
During 2014, JBS was recognized as the company from the food sector that achieved more advances in actions against
deforestation in its supply chain. This information is present in the report Deforestation-free supply chains: from commitments to
action, prepared by CDP - Driving Economies Sustainable, module CPD Forest, a non governmental international entity which
supports the development of sustainable economies and disclose information from corporate data about climate changes, water
and forests for 240 global investors that represent US$15 trillion in assets.
Yet in 2014, JBS took adherence to the CDP Supply Chain Working Group denominated Forest Program, which is composed by
companies that are committed with the reduction of deforestation in their value chain. JBS participation in CDP is wider than the
Investor module, since the Company is also present in the modules Forests, Water and Supply Chain, presenting information
regarding its exposure to risks related to deforesting, sustainable corporate management of water and action strategies related
to climate change .

PG.

13

Sustainability (cont.)
In addition to the initiatives in Brazil, JBS develops several projects related to the Sustainability area in the United States, as
follows:
Air Emissions and Odor Control Systems: JBS installed in its facility in Louisville, Kentucky pork processing plant, a new
40,000 cubic foot per minute (CFM) pack bed scrubbers to address high intensity processes and improve general room
air. We then upgraded to a 75,000 CFM room air scrubber. In addition, the Company installed a softener for the scrubbers
to minimize scaling and required water usage. Also, the grease tank was covered to minimize vapor to room air, in addition
to the installation of two new shell and tube condensers to more efficiently recover waste energy. Louisville creates over
300,000 gallons per day of 140 degree water from waste heat. This hot water is then used to effectively clean the plant. By
utilizing this waste heat, JBS reduces its usage of natural resources (i.e., natural gas) and its carbon footprint.

Reduction in Styrofoam: JBS is shifting as many customers as it can from bulk boxed pork to single pack vacuum
packaging, so that retailers no longer need to repack product in Styrofoam trays. This removes Styrofoam from the waste
stream.
Reduction in Waste Product: eight of the beef and pork facilities use centrifuges to capture waste grease from the
wastewater flow stream, and then turn it into a salable product. Many of the chicken facilities capture excess material and
produce a salable product, as well. This, in many cases, completely eliminates landfilling and land application operations,
while providing a financial benefit to the company.
Land Nutrient Management: JBS has been doing land nutrient management planning well before it was required by law.
Most of the manure produced at JBS Five Rivers Cattle Feeding is applied to the land of neighboring farms or composted
by third party composters for the commercial compost market. JBS applies all storm water to land that we own or control.
Since the nutrients in storm water are less transportable, it requires that we very intensively manage the nutrients applied to
the land, so that the land will be available for many years into the future. We employ three Certified Crop Consultants that
ensure that the nutrients are utilized in a sustainable manner.

PG.

14

Social Commitment
Aware of the way it impacts and is impacted by its different stakeholders, JBS seeks to maintain an open and clear dialogue
with them, based on its Values and Beliefs, and on the transparency of the information around its attitudes, conducts and its
results.
JBS believes that the relationship of the communities in regions where it is presents is very important and contributes with local
social and economic development. Its facilities and sales offices in Brazil maintains social partnerships with the communities
around them, providing support for events and educational projects, promoting campaigns about quality of life, environmental
education, and others. The Company also maintains available to the public in general a Phone Service to receive complaints
and requests.
As a way to valorize the culture and the development of the communities where it is present, JBS favors the hiring of employees
from the cities where its operations are located. In the case of a shut-down in one of its facilities, JBS has a shut-down
committee, which defines actions to minimize the social impacts in the local communities.
It is possible to know some of JBS initiatives with communities below:
Special Chefs Institute: a partnership between JBS and Special Chefs Institute offers courses of gastronomy for people
with Down syndrome as an aid in the development of these youngsters. In 2014, the project currently had over 300
students and a list with names of renowned chefs among the volunteers who teach the courses.
Tanning Course: through the Program of Incentive to Qualification, JBS Couros offers to its employees that outstands in
their positions the opportunity to attend the course of Tanning in SENAI Technical School. The course lasts two years and a
half and, while attending classes, employees maintain their employment contracts, developing their activities in Montenegro
facility (RS), close to the school. In 2014 the program had a total of 23 students who are having the opportunity to acquire
more technical knowledge and grow professionally.
Social Fuel Seal: through the Biodiesel Business, the company participates in the Social Fuel Seal, an initiative of Ministry
of Mines and Energy which provides technical assistance and training for farmers related with the plantation of the raw
material for the production of biodiesel. Through the Social Fuel Seal, the farmer families may have, for example, access to
credit facilities for the purchase of oil seeds. JBS participates of this Seal since 2008, and in 2014 around 490 families were
assisted by the Company.
American Cancer Societys: through JBS USA, every year, JBS participates in the American Cancer Societys Relay for
Life, a national event. Teams, in each community, pledge to "walk" for 24 hours, raising money for cancer research. At the
JBS Corporate Office, a fundraising team puts together a variety of fun events to raise money for the cause.
JBS USA United Way: JBS USA and its employees has been a proud sponsor of the United Way of Weld County for many
years. Every year, the fundraising committee puts together several fundraisers to raise money for less fortunate families
and children in the US. Fundraisers include: golf tournaments, silent auctions, cookbook sales, bake sales and others.

The Special Olympics: in 2014, JBS USA have fed over 2,000 Special Olympians and volunteers in Northern Colorado
during the Special Olympics, an event with more than 40 years of tradition, where athletes with intellectual disabilities have
come together to compete. coaches, trainers, doctors, nurses and volunteers step forward to help the athletes. Young
people with and without disabilities, come together to discuss diversity and acceptance.

PG.

15

Financial
Performance

Economic Environment
According to UN World Economic Situation and Prospects 2015 report, the global economy grew 2.6% in 2014. The recovery of
economy was affected by new challenges, which includes a number of unexpected shocks, such as the heightened geopolitical
conflicts in different parts of the world. On the other hand, the global trading recorded an increase of 3.4%, forecasted to have a
modest recover with the improvement in global output, with the volume of world imports of goods and services projected to grow by 4.7
per cent in 2015 and 5.0 per cent in 2016.
Information from the Bureau of Economic Analysis show that the US recorded a growth of 2.4% in GDP in 2014, as a reflection of
positive contribution from personal consumption expenditures, nonresidential fixed investment, exports, state and local government
spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal
government spending. Imports, which are a subtraction in the calculation of GDP, increased when compared to 2013.
In relation to meat in the US, USDAs Cattle report published on January 30th, 2015, revised the 2014 calf crop higher and pointed to a
higher level of cattle outside feedlots on January 1, 2015, with fed cattle slaughter higher than forecast last month, partially offset by
slower growth in carcass weights. . Cow slaughter is still expected to be below 2014. Pork production is raised as slaughter to date has
been above expectations. This improvement is also due to the fact that the PED virus, which impacted the hog herds in 2013 and
2014, has been losing strength, mainly due to initiatives promoted by the farmers, such as a higher level of hygiene and a higher
control of the access to animals, contributing to a better control of the disease. Broiler production should be higher as well, as lower
feed costs and energy prices are expected to encourage higher production.
In Brazil, the Central Bank estimated a GDP increase of 0.2% in 2014, highlighting that the expansion rates has been lower than the
potential growth in economy. In addition, according to Central Bank report, the inflation measured by the variation of IPCA in twelve
months reached 6.56% in November, 0.79 basis point above LTM November 2013. In addition, the inflation for food and beverage
segment was 7.83% (vs. 8.63% LTM November 2013) and in services around 1/3 from the basket that composes IPCA reached
8.29% (vs. 8.55% LTM November 2013) and still higher than the variation of free prices. Data from 2014 will be published in the end of
March 2015.
In addition, cattle prices in Brazil increased 25% when compared to 2013, ending 2014 at R$143.29/@. This increase in cattle prices is
due to a higher demand in both markets, domestic and exports, highlighting beef exports, which recorded a growth of 4.1% in volume
and 7.9% in revenues compared with 2013, reaching 2,675 thousand tons and US$6,609.9 million, which in Reais corresponds to
R$13,673.1 million. According to Antnio Jorge Camardelli, president of Brazilian Association of Beef Exporters (ABIEC), the scenario
for 2015 should remain positive, as, in addition to expected announcements of trade agreements with new export markets, such as the
US, the association has been taken several initiatives to promote Brazilian beef around the world. Also, Camardelli mentioned the
Brazilian presence in Gulfood in Dubai and highlighted that the Arab countries form an essential market for Brazilian beef, where in the
last 10 years, sales for that region more than doubled, from US$537 million to US$1.3 billion, and pointed saying that Brazil has
potential to grow even more.
According to the executive president of Brazilian Association of Animal Protein (ABPA), Francisco Turra, Brazil is, since 2005, the
worlds largest poultry exporter, shipping products for more than 150 countries. 2014 was positive for the poultry market, having as
highlights the decrease in grain costs, mainly due to the international impact caused by the record crop of corn and soy in the US, in
addition to good availability of grains in Brazil. In accordance with Cepea, this is a trend that should continue in 2015, as the market
expects that the US, Argentina and Brazil have a record grain crop in 2014-2015. The reopening of new markets for poultry meat also
contributed to the export mix in the second half of 2014, highlighting the Russian demand and the reopening of South Africa, indicating
that Brazil continues to access new markets. Yet, the real devaluation against the US dollar benefited the poultry producers, since
Brazil is the largest exporter of this protein in the world. In the domestic market, poultry meat currently is the most consumed protein.
According to a survey supported by ABPA, this meat is present in 100% of Brazilian homes.
For 2015, JBS sees with optimism the recovery of economy in the developed countries, which combined with the constant growth in
demand for proteins, especially in the emerging markets, indicates a promise environment for the year.
Source: JBS, BACEN, BEA, IBGE, ABIEC, ABPA, SECEX.

PG.

17

Analysis of Consolidated Results

Analysis of the main financial indicators of JBS by Business Unit (in local currency)
4Q14

3Q14

4Q13

2014

2013

Net Revenue
JBS Foods

R$

3,649.0

3,376.8

8.1%

2,891.6

26.2%

12,890.3

n.a.

JBS Mercosul

R$

7,545.7

6,470.5

16.6%

6,312.0

19.5%

26,191.7

21,445.4

22.1%

JBS USA Beef

US$

5,923.7

5,849.3

1.3%

4,809.9

23.2%

21,625.2

18,621.2

16.1%

JBS USA Pork

US$

964.0

937.8

2.8%

904.9

6.5%

3,827.0

3,518.7

8.8%

JBS USA Chicken

US$

2,110.4

2,268.0

-6.9%

2,047.3

3.1%

8,583.4

8,411.1

2.0%

JBS Foods

R$

656.1

576.0

13.9%

227.3

188.7%

2,052.3

JBS Mercosul

R$

534.1

554.6

-3.7%

692.4

-22.9%

2,319.0

2,385.1

-2.8%

JBS USA Beef

US$

325.1

504.9

-35.6%

113.9

185.4%

916.1

375.8

143.8%

JBS USA Pork

US$

95.7

113.2

-15.4%

86.3

10.9%

405.6

227.6

78.2%

JBS USA Chicken

US$

367.8

435.4

-15.5%

196.6

87.1%

1,352.2

810.1

66.9%

JBS Foods

18.0%

17.1% 0.92 p.p.

7.9%

10.12 p.p.

15.9%

JBS Mercosul

7.1%

8.6% -1.49 p.p.

11.0%

-3.89 p.p.

8.9%

11.1%

-2.27 p.p.

JBS USA Beef

5.5%

8.6% -3.14 p.p.

2.4%

3.12 p.p.

4.2%

2.0%

2.22 p.p.

JBS USA Pork

9.9%

12.1% -2.14 p.p.

9.5%

0.39 p.p.

10.6%

6.5%

4.13 p.p.

JBS USA Chicken

17.4%

19.2% -1.77 p.p.

9.6%

7.83 p.p.

15.8%

9.6%

6.12 p.p.

EBITDA

EBITDA Margin

Performance by Business Unit

PG.

18

Analysis of Consolidated Results

Consolidated analysis of the main operational indicators of JBS
R$ m illion

Net Revenue
Cost of Goods Sold
Gross Income

4Q14
R$ MM
% NR

%
4Q14 vs 3Q14

3Q14
R$ MM
% NR

4Q13
R$ MM
% NR

%
4Q14 vs 4Q13

34,303.2 100.0%

30,778.6

100.0%

11.5%

27,222.2 100.0%

26.0%

(28,867.1) -84.2%

(25,218.1)

-81.9%

14.5%

(23,490.3) -86.3%

22.9%

92,902.8 100.0%

29.7%
25.6%

5,560.5

18.1%

-2.2%

13.7%

45.7%

18,673.4

12.8%

57.6%

(1,744.4)

-5.7%

19.5%

(1,753.0) -6.4%

18.9%

(7,154.3) -5.9%

(5,262.2) -5.7%

36.0%

General and Adm. Expenses

(1,146.2) -3.3%

(787.8)

-2.6%

45.5%

(751.0) -2.8%

52.6%

(3,330.0) -2.8%

(2,520.0) -2.7%

32.1%

(702.0) -2.0%

(978.7)

-3.2%

-28.3%

(767.7) -2.8%

-8.6%

(3,637.6) -3.0%

(2,380.3) -2.6%

8.2

0.0%

-23.7%

(21.4) -0.1%

(241.4)

-0.8%

11.8

0.0%

5.9%

-24.7%

450.7

1.7%

203.6%

Other Income (expense)

Operating Income
Income and social contribution taxes

6.3

0.0%

(142.1) -0.4%
1,368.3

4.0%

1,816.4

3,731.9

120,469.7 100.0%

(101,796.3) -84.5% (81,056.1) -87.2%

(2,083.8) -6.1%

Equity in earnings of subsidiaries

15.8%

2013
R$ MM
% NR

Selling Expenses

Net Financial Income (expense)

5,436.2

%
2014 vs 2013

2014
R$ MM
% NR

26.1

15.5%

11,846.7

0.0%

(385.7) -0.3%
4,191.8

3.5%

0.0%

84.1

0.1%

1,775.0

1.9%

136.2%
171.9%

(661.4) -1.9%

(588.4)

-1.9%

12.4%

(241.0) -0.9%

174.5%

(1,785.4) -1.5%

(656.7) -0.7%

Participation of non-controlling shareholders

(88.1) -0.3%

(135.2)

-0.4%

-34.8%

(69.0) -0.3%

27.7%

(370.5) -0.3%

(191.4) -0.2%

Net Income (Loss)

618.8

1.8%

1,092.9

3.6%

-43.4%

140.7

0.5%

339.7%

2,035.9

1.7%

926.9

1.0%

Adjusted EBITDA

3,289.7

9.6%

3,617.9

11.8%

-9.1%

1,873.5

6.9%

75.6%

11,090.0

9.2%

6,130.3

6.6%

Net Income (Loss) per thousand shares

214.09

-43.3%

49.02

336.7%

706.49

377.54

52.8%

6.7

288.3%

93.6%
119.6%
80.9%

323.32

118.5%

Number of Animals Processed

4Q14

3Q14

4Q13

2014

2013

Heads processed (thousand)

Cattle

4,810.0

4,728.4

1.7%

4,678.2

2.8%

18,807.1

18,700.5

0.6%

Hogs

4,514.6

4,015.7

12.4%

4,615.6

-2.2%

16,827.0

14,593.7

15.3%

255,166.3

241,167.5

5.8%

219,870.7

16.1%

953,648.7

n.a.

1,468.5

1,273.5

15.3%

1,309.8

12.1%

5,375.7

4,881.1

10.1%

Birds
Smalls
Not including PPC
Not including poultry

PG.

19

Consolidated Results
Net Revenue
JBS consolidated net revenue in 4Q14 totaled R$34,303.2 million, an expansion of R$7.081,0 million, or
26,0% higher than 4Q13. The main highlights were Mercosul, which recorded a 19.5% increase in revenue
and JBS USA Beef and Pork operations, whose revenues increased 23.2% and 6.5% compared to the same
period last year, respectively, and JBS Foods, with an increase of 26.2% compared to 4Q13.
In 2014, consolidated net sales was R$120.5 billion, an increase of R$27.6 billion, or 29.7% higher than in
2013. Approximately 74% of JBS global revenue were derived from domestic sales and 26% came from
exports.

Adjusted EBITDA
Consolidated Adjusted EBITDA in 4Q14 was R$3,289.7 million, an increase of 81.0% compared to 4Q13.
EBITDA margin in the quarter was 9.6%. The main highlights were the performance of Chicken, Pork and
Beef operations in the US, which registered an EBITDA increase of 87.1%, 10.9% and 185.4%, respectively,
as well as JBS Foods, which recorded an EBITDA of R$656.1 million, with an EBITDA margin of 18.0%.
R$ million

2013

-42.4%

209.7 237.1%

2,406.4

1,118.3

Financial income (expense), net

702.0

978.7

-28.3%

767.7

-8.6%

3,637.6

2,380.3

52.8%

Current and diferred income taxes

661.4

588.4

12.4%

241.0 174.5%

1,785.4

656.7

171.9%

Depreciation and amortization

715.3

611.1

17.1%

635.2

12.6%

2,546.8

2,038.8

24.9%

-6.3

-8.2

-23.7%

21.4

-26.1

-6.7

288.3%

220.0 132.0%

Premium due to early liquidation paid by JBS USA

(=) EBITDA

510.4

4Q13

2014

1,228.0

Restructuring, reorganization, donation and indemnity

3Q14

706.9

Equity in subsidiaries

4Q14

Net income for the period

115.2%

-1.4

745.5

-57.1

0.0

0.0

0.0

-5.6

0.0

3,289.7

3,617.9

-9.1%

1,873.5

75.6% 11,090.0

6,130.3

80.9%

Net Financial Expense

In 4Q14, JBS recorded net financial expense of R$702.0 million, impacted by the exchange rate variation of
R$1,366.5 million, compensated by R$1,398.9 million on derivative results (protection against exchange rate
variation). Interest expense was R$860.0 million, whilst interest revenue was R$153.3 million. Taxes,
contributions, tariffs and others resulted in an expense of R$27.8 million. For the year, net financial expense
amounted to R$3,637.6 million.

Net Income
Net income in 4Q14, excluding non-controlling interest, was R$618.8 million, an increase of 339.7%
compared to 4Q13. Earnings per thousand shares were R$214.1. In 2014, reported net income was
R$2,035.9 million, an increase of R$1,109.0 million, or 119.6% higher over 2013, which represents earnings
per thousand shares of R$706.5.

PG.

20

Consolidated Results
CAPEX
In 4Q14, total capital expenditure (CAPEX) was R$1.6 billion, of which R$434.8 million due to net effect of
working capital of acquired / merged company and R$1,219.6 million in additions to property, plant and
equipment and intangible assets. Approximately 40% was related to acquisitions and 60% in expansions,
facilities modernization and in maintenance. In 2014, CAPEX was R$4.3 billion.

Cash Generation
In 4Q14 the Company generated net cash flow from operations of R$5.32 billion and free cash flow (after
capex) of R$3.66 billion, due to the strong performance of JBS businesses units and the Companys
protection strategy of exchange rate variation. In 2014, JBS generated R$9.0 billion in net cash flow from
operations and R$4.7 billion in free cash flow.

Indebtedness
JBS ended 4Q14 with leverage of 2.1x, compared to 2.5x in 3Q14 and 3.1x in 2Q14. The reduction in
leverage is due to the improvement in operational performance of JBS in the last twelve months, as well as to
the strong free cash generation in the quarter.

R$ million
Gross debt
(+) Short Term Debt
(+) Long Term Debt
(-) Cash and Equivalents
Net debt
Net debt/EBITDA

12/31/14
40,079.1
13,687.0
26,392.2
14,910.4
25,168.7

09/30/14
38,426.7
11,483.4
26,943.3
12,578.5
25,848.3

2.1x

2.5x

Var.%
4.3%
19.2%
-2.0%
18.5%
-2.6%

US$ milhes

Net debt in US dollars reduced US$1.0 billion in comparison with 3Q14.

10,464

11,221

10,546

9,475

Net debt in US dollars converted at the

exchange rate at the end of the period.

1Q14

2Q14

3Q14

4Q14

Leverage
7,000
6,000

3.7x
3.3x

5,000

3.2x
2.5x

4,000

2.1x

3,000

EBITDA (R$ million)

Leverage

2,000
1,000
0
4Q13

1Q14

2Q14

3Q14

4Q14

PG.

21

Consolidated Results
Indebtedness (cont.)
The Company ended the quarter with R$14,910.4 million in cash, equivalent to approximately 109% of its
short-term debt. In addition, JBS USA has US$1.43 billion fully available under revolving credit facilities
which, if added to the current cash position, represents 119% of short term debt.
The percentage of short term debt (ST) in relation to total debt was 34% in 4Q14.

Debt profile ST / LT
4Q13

29%

71%

1Q14

29%

71%

2Q14

28%

72%

3Q14

30%

70%

4Q14

34%

66%

Short Term

Long Term

At the end of the period, 80% of JBS consolidated debt was denominated in U.S. dollars, with an average
cost of 5.49% per year. The proportion of debt denominated in Reais, 20% of consolidated debt, has an
average cost of 11.57% per year.

Breakdown by Currency &

Average Cost

Breakdown by Source

Breakdown by Company

11.57% per
annum

R$
20%

Commercial
Banks 59.9%

US$
80%

5.49% per
annum

Capital
Markets 40.0%

Subsidiaries
28%
JBS Foods
14%

JBS S.A.
58%

BNDES 0.1%

PG.

22

Analysis of Results by Business Unit

JBS Foods
JBS Foods posted net revenue of R$3,649.0 million in 4Q14, an increase of 8.1% compared to 3Q14.
Revenue on the domestic market was R$1,923.3 million, an increase of 16.8% compared to last quarter,
reflecting an increase in sales volumes in the three products category (pork, poultry and processed products).
The main highlights were fresh chicken (+50.8% vs 3Q14). In the export market, net revenue was R$1,725.7
million, stable compared to 3Q14. In this quarter, the main export markets included Asia, MENA and Russia.

EBITDA in 4Q14 totaled R$656.1 million, which represents an increase of 13.9% over 3Q14. EBITDA margin
was 18.0%, compared to 17.1% in the last quarter. This improvement in EBITDA is a result of a decrease in
raw material costs , coupled with a seasonal increase in demand in chicken products due to the festive
period. In addition, there was an improvement in chicken prices in the international market, which
corresponds to 83% of sales in exports.
Throughout the quarter, JBS Foods continued to improve the number of sales points, which totaled 78.6
thousand at the end of this period and reflects one of the Companys strategic pillar regarding the pursuit for
an even more efficient execution in the sales points.
In 2014, net revenue totaled R$12,890.3 million and EBITDA was R$2,052.3 million, with an EBITDA margin
of 15.9%. During 2014, JBS Foods made important investments in the production process to attend the best
quality standards and delight its customers. Over 100 new products were launched in order to innovate the
portfolio, increase the value of the brands and increase consumer preference. The logistic model was
redesigned, reducing costs, improving the service level and the presence of its products in the market.

Highlights

Net Revenue
COGS
Gross Profit
EBITDA

JBS Foods

4Q14
R$
3,649.0
(2,574.0)
1,075.0
656.1

% NR
100.0%
-70.5%
29.5%
18.0%

3Q14
R$
3,376.8
(2,413.9)
962.9
576.0

4Q14

% NR
100.0%
-71.5%
28.5%
17.1%

3Q14

%
QoQ
8.1%
6.6%
11.6%
13.9%

4Q13
R$
2,891.6
(2,201.1)
690.5
227.3

%
% NR
YoY
100.0% 26.2%
-76.1% 16.9%
23.9% 55.7%
7.9% 188.7%

2014
R$
% NR
12,890.3
100.0%
(9,358.7)
-72.6%
3,531.5
27.4%
2,052.3
15.9%

4Q13

2014

Birds Processed (thousand)

255,166.3

241,167.5

5.8%

219,870.7

16.1%

953,648.7

Hogs processed (thousand)

1,185.8

1,138.5

4.2%

1,034.2

14.7%

4,435.0

PG.

23

Analysis of Results by Business Unit

Breakdown of Net Revenue
4Q14

3Q14

4Q13

Domestic Market
Net Revenue (million R$)
Fresh Poultry
Fresh Pork
Processed / Prepared Products
Others
TOTAL

2014

608.1
131.1
1,064.6
119.4
1,923.3

416.6
120.3
1,024.0
86.2
1,647.1

46.0%
9.0%
4.0%
38.5%
16.8%

309.6
87.5
830.8
19.1
1,247.0

96.4%
49.9%
28.2%
525.4%
54.2%

1,718.9
455.9
3,699.8
380.6
6,255.2

Volume (thousand tons)

Fresh Poultry
Fresh Pork
Processed / Prepared Products
Others
TOTAL

113.3
23.1
172.4
308.8

75.2
22.2
168.8
266.2

50.8%
3.9%
2.1%
16.0%

54.7
15.4
149.2
219.3

107.4%
49.7%
15.5%
40.8%

319.7
81.6
621.2
1,022.5

Average Price (R$/Kg)

Fresh Poultry
Fresh Pork
Processed / Prepared Products
Others

5.37
5.68
6.18
-

5.54
5.42
6.07
-

-3.2%
4.9%
1.8%
-

5.67
5.67
5.57
-

-5.4%
0.2%
10.9%
-

5.38
5.59
5.96
-

4Q14

3Q14

4Q13

2014

Exports
Net Revenue (million R$)
Fresh Poultry
Fresh Pork
Processed / Prepared Products
Others
TOTAL

1,423.9
209.3
92.5
1,725.7

1,347.0
288.7
82.7
11.3
1,729.7

5.7%
-27.5%
11.8%
-0.2%

1,342.5
178.6
121.3
2.4
1,644.7

6.1%
17.2%
-23.8%
4.9%

5,406.1
848.0
369.8
11.3
6,635.1

Volume (thousand tons)

Fresh Poultry
Fresh Pork
Processed / Prepared Products
Others
TOTAL

278.0
23.5
13.2
314.7

284.3
31.4
12.6
2.9
331.1

-2.2%
-25.1%
4.8%
-5.0%

277.6
26.1
14.4
1.6
319.6

0.1%
-9.8%
-8.0%
-1.5%

1,118.3
105.5
54.2
2.9
1,280.9

Average Price (R$/Kg)

Fresh Poultry
Fresh Pork
Processed / Prepared Products
Others

5.12
8.91
6.99
-

4.74
9.20
6.55
3.93

8.1%
-3.2%
6.7%
-

4.84
6.85
8.43
1.49

5.9%
30.0%
-17.1%
-

4.83
8.04
6.82
3.93

PG.

24

Analysis of Results by Business Unit

JBS Mercosul
JBS Mercosul posted net revenue of R$7,545.7 million in 4Q14, 19.5% higher than 4Q13, influenced by an
increase in volumes in the export market. Compared to 3Q14, net revenue increased 16.6%.
EBITDA totaled R$534.1 million for the quarter, a decrease of 3.7% compared to 3Q14, due to an increase in
cattle prices in the period, partially compensated by an increase in fresh beef prices in the domestic and
international markets. EBITDA margin was 7.1%.
In 2014, JBS Mercosul net revenue was R$26,191.7 million, an improvement of 22.1% as compared to 2013.
EBITDA was R$2,319.0 million, a decrease of 2.8% compared to the previous year. JBS maintained its
strategy of investing in brands and in products innovation in the domestic market. The launching of
convenience beef products reflected in an increase in the sales price in this category (processed products) of
16.1% in the domestic market..
Paraguay and Uruguay operations maintained the good performance presented in the last quarters as a
result of the initiatives related to loyalty programs for the suppliers, attending niche markets and focus in cost
reduction and better utilization of production capacity. In Argentina, JBS continues focused in rationalizing its
product portfolio and reducing costs and increasing the value added products portfolio.

Highlights

Net Revenue
COGS
Gross Profit
EBITDA

JBS Mercosul
Bovine processed (thousand)

4Q14
R$
7,545.7
(5,956.2)
1,589.5
534.1

% NR
100.0%
-78.9%
21.1%
7.1%

3Q14
R$
6,470.5
(4,979.2)
1,491.3
554.6

4Q14
2,471.4

% NR
100.0%
-77.0%
23.0%
8.6%

3Q14
2,316.7

%
QoQ
16.6%
19.6%
6.6%
-3.7%

4Q13
R$
6,312.0
(4,768.6)
1,543.5
692.4

%
% NR
YoY
100.0% 19.5%
-75.5% 24.9%
24.5%
3.0%
11.0% -22.9%

2014
2013
R$
% NR
R$
% NR
26,191.7
100.0% 21,445.4 100.0%
(20,190.0)
-77.1% (16,165.3) -75.4%
6,001.8
22.9% 5,280.2
24.6%
2,319.0
8.9% 2,385.1
11.1%

4Q13

6.7%

2,362.6

4.6%

2014
9,381.5

%
YoY
22.1%
24.9%
13.7%
-2.8%

2013
9,391.5

-0.1%

PG.

25

Analysis of Results by Business Unit

Breakdown of Net Revenue
Domestic Market

4Q14

3Q14

4Q13

2014

2013

Net Revenue (million R$)

Fresh and Chilled Products

3,436.3

2,605.9

31.9%

2,562.0

34.1%

11,309.0

9,574.2

18.1%

Processed Products

330.7

335.6

-1.5%

276.7

19.5%

1,298.7

1,087.6

19.4%

Others

474.9

449.0

5.8%

425.5

11.6%

1,784.3

1,680.9

6.2%

4,242.0

3,390.5

25.1%

3,264.3

29.9%

14,392.0

12,342.7

16.6%

369.4

322.7

14.5%

353.7

4.4%

1,310.4

1,388.0

-5.6%

TOTAL
Volume (thousand tons)
Fresh and Chilled Products
Processed Products

40.3

45.6

-11.6%

42.6

-5.3%

172.8

168.0

2.8%

Others

181.3

161.3

12.4%

181.6

-0.1%

667.2

705.5

-5.4%

TOTAL

590.9

529.6

11.6%

577.8

2.3%

2,150.4

2,261.5

-4.9%

Fresh and Chilled Product

9.30

8.08

15.1%

7.24

28.5%

8.63

6.90

25.1%

Processed Items

8.21

7.36

11.5%

6.50

26.3%

7.52

6.47

16.1%

Others

2.62

2.78

-5.8%

2.34

12.0%

2.67

2.38

12.2%

Exports

4Q14

3Q14

2014

2013

Average Price (R$/Kg)

4Q13

Net Revenue (million R$)

Fresh and Chilled Products

2,174.6

1,980.7

9.8%

1,918.5

13.4%

7,603.0

6,156.2

Processed Products

237.9

201.1

18.3%

333.9

-28.7%

854.4

936.8

-8.8%

Others

891.2

898.1

-0.8%

795.4

12.1%

3,342.2

2,009.7

66.3%

3,303.7

3,080.0

7.3%

3,047.7

8.4%

11,799.7

9,102.7

29.6%

5.8%

TOTAL

23.5%

Volume (thousand tons)

Fresh and Chilled Products

191.2

187.9

1.8%

192.9

-0.9%

734.7

694.6

Processed Products

18.3

15.6

17.4%

12.6

45.0%

63.8

60.5

5.5%

Others

68.8

74.0

-6.9%

61.7

11.5%

278.0

127.2

118.6%

TOTAL

278.3

277.4

0.3%

267.2

4.2%

1,076.5

882.3

22.0%

Fresh and Chilled Beef

11.37

10.54

7.9%

9.95

14.4%

10.35

8.86

16.8%

Processed Beef

13.02

12.92

0.8%

26.50

-50.9%

13.40

15.50

-13.5%

Others

12.95

12.14

6.6%

12.89

0.5%

12.02

15.80

-23.9%

Average Price (R$/Kg)

PG.

26

Analysis of Results by Business Unit

JBS USA Beef (including Australia and Canada)
Net revenue in 4Q14 for this business unit was US$5,923.7 million, an increase of 23.2% compared to the
same period in 2013. This improvement is due to an increase in prices of 26.4% and 25.8% in the domestic
and international markets, respectively, partially compensated by a decrease in volume in both markets.
Compared with 3Q14, net revenue was moderately stable and increased 1.3%.
EBITDA was US$325.1 million in the quarter, an increase of 78.2% over 4Q13, with an EBITDA margin of
5.5%.
This quarter results is a reflection of the Company strategy regarding the purchase of cattle, which permitted
the improvement in COGS, coupled with better beef prices in some markets that JBS operates. Domestic
sales in Australia and exports from the US were highlights in the quarter, with significant price increases. The
operation in Canada also improved compared to the same period last year and presented volume and price
growth on exports. The main destinations of this business unit were Mexico, the US (exports from Australia
and Canada), Japan, Colombia, South Korea and Greater China.
In 2014, net sales from this business unit was US$21,625.2 million, a 16.1% growth in relation to 2013.
EBITDA was US$916.1 million, an increase of 143.8% over 2013. EBITDA margin was 4.2% compared to
2.0% in 2013.
Annual results demonstrate initiatives adopted by the Company and implemented during the year. The US
beef operation was reorganized, splitting the management of the fed cattle business and the regional
business. This initiative provided more agility in decision making and flexibility to adjust the business
according to market conditions. In addition, there was reduction in production costs, product mix and sales
chain rationing, as well as investments in innovation and efficiency gains.

Highlights (US GAAP)

Net Revenue
COGS
Gross Profit
EBITDA

4Q14
US$
% NR
5,923.7
100.0%
(5,594.8)
-94.4%
328.9
5.6%
325.1
5.5%

JBS USA Beef (including AUS and CAN)

3Q14
US$
% NR
5,849.3
100.0%
(5,343.0)
-91.3%
506.3
8.7%
504.9
8.6%

4Q14

Bovine processed (thousand)

2,338.6

%
QoQ
1.3%
4.7%
-35.0%
-35.6%

4Q13
2014
2013
%
US$
% NR
YoY
US$
% NR
US$
% NR
4,809.9
100.0% 23.2% 21,625.2
100.0% 18,621.2 100.0%
(4,709.8)
-97.9% 18.8% (20,723.8)
-95.8% (18,268.5) -98.1%
100.1
2.1% 228.7%
901.4
4.2%
352.6
1.9%
113.9
2.4% 185.4%
916.1
4.2%
375.8
2.0%

3Q14
2,411.7

-3.0%

4Q13
2,315.5

1.0%

2014
9,425.6

%
YoY
16.1%
13.4%
155.6%
143.8%

2013
9,308.9

1.3%

Breakdown of Net Revenue

Domestic Market
Net Revenue (US$ million)
Volume (tons)

4Q14

3Q14

4Q13

4,163.4

4,203.8

-1.0%

3,429.8

2014

2013

21.4%

15,462.8

13,500.2

14.5%

876.2

903.3

-3.0%

912.1

-3.9%

3,524.4

3,540.6

-0.5%

Average Price (US$/Kg)

4.75

4.65

2.1%

3.76

26.4%

4.39

3.81

15.1%

Exports

4Q14

3Q14

2014

2013

Net Revenue (US$ million)

Volume (tons)
Average Price (US$/Kg)

4Q13

1,760.3

1,645.5

7.0%

1,380.1

27.5%

6,162.4

5,121.0

317.6

332.0

-4.3%

324.1

-2.0%

1,267.7

1,180.8

20.3%
7.4%

5.54

4.96

11.8%

4.41

25.8%

4.86

4.20

15.8%

Note 1. Considers China and Hong Kong

PG.

27

Analysis of Results by Business Unit

JBS USA Pork
Net revenue in the quarter totaled US$964.0 million, an increase of 6.5% compared to 4Q13. This result is
due to an increase of sales prices, coupled with a 4.0% increase in the export volume. Compared with 3Q14,
net revenue grew 2.8%, due to an increase of 60.9% in volume sold in the international market.
EBITDA for 4Q14 was US$95.7 million, an increase of 10.9% when compared to 4Q13, with an EBITDA
margin of 9.9%. This result reflects an increase in prices of 10.3% the domestic market and 8.7% on exports.
The main destinations were Mexico, Japan, Greater China1, South Korea and Canada.
In 2014, net revenue for this business unit was US$3,827.0 million, an increase of 8.8% compared to 2013.
EBITDA was US$405.6 million, 78.2% higher over the same period last year.

Highlights (US GAAP)

Net Revenue
COGS
Gross Profit
EBITDA

4Q14
US$
964.0
(863.2)
100.8
95.7

% NR
100.0%
-89.5%
10.5%
9.9%

JBS US Pork

3Q14
US$
937.8
(820.0)
117.8
113.2

4Q14

Hogs Processed (thousand)

3,328.8

%
QoQ
2.8%
5.3%
-14.4%
-15.4%

% NR
100.0%
-87.4%
12.6%
12.1%

4Q13
US$
% NR
904.9
100.0%
(815.3)
-90.1%
89.6
9.9%
86.3
9.5%

3Q14
2,877.3

15.7%

%
YoY
6.5%
5.9%
12.6%
10.9%

4Q13
3,581.4

2014
2013
US$
% NR
US$
% NR
3,827.0
100.0% 3,518.7
100.0%
(3,413.1)
-89.2% (3,284.2) -93.3%
414.0
10.8%
234.5
6.7%
405.6
10.6%
227.6
6.5%

-7.1%

2014
12,392.0

%
YoY
8.8%
3.9%
76.5%
78.2%

2013
13,559.5

-8.6%

2013

Breakdown of Net Revenue

Domestic Market

4Q14

3Q14

4Q13

2014

Net Revenue (US$ million)

799.8

825.4

-3.1%

759.6

5.3%

3,244.0

2,962.3

9.5%

Volume (thousand tons)

294.9

260.4

13.3%

308.9

-4.5%

1,121.1

1,190.7

-5.8%

Average Price (US$/Kg)

2.71

3.17

-14.4%

2.46

10.3%

2.89

2.49

16.3%

Exports
Net Revenue (US$ million)

4Q14

3Q14

4Q13

2014

2013

164.2

112.4

46.1%

145.3

13.0%

583.1

556.4

4.8%

Volume (thousand tons)

62.7

39.0

60.9%

60.3

4.0%

216.5

226.3

-4.3%

Average Price (US$/Kg)

2.62

2.88

-9.2%

2.41

8.7%

2.69

2.46

9.5%

Note 1. Considers China and Hong Kong

PG.

28

Analysis of Results by Business Unit

JBS USA Chicken (Pilgrims Pride Corporation - PPC)
PPC recorded a net revenue of US$2,110.4 million in 4Q14, an increase of 3.1% compared with 4Q13,
prevenient from higher sales in the US (2.8%) and Mexico (5.7%). In 2014, net sales was US$8,583.4 million,
2.0% higher in relation to 2013.
EBITDA in 4Q14 was US$367.8 million, an increase of 87.1% over 4Q13, with an EBITDA margin of 17.4%.
This results reflects a significant improvement in PPC gross margin, due to a reduction in grain prices,
combined with better sales mix and efficiencies at operational level. In 2014, EBITDA was US$1,352.2
million, 66.9% greater than 2013. EBITDA margin was 15.8%, compared to 9.6% in the previous year.
Net income in the quarter was US$167.2 million and reflects US$48.0 million adjustment due to the early
retirement of the 2018 notes and a non-cash foreign exchange loss due to the Mexican Peso devaluation. The
2014 net income reflects an improvement of 17% compared to the same period in 2013. Pilgrim's recognized US$711.7
million in net income for the full year with earnings per share of US$2.74, demonstrating consistently solid
performance over the entire year.

Highlights (US GAAP)

Net Revenue
COGS
Gross Profit
EBITDA

4Q14
US$
2,110.4
(1,731.3)
379.1
367.8

% NR
100.0%
-82.0%
18.0%
17.4%

3Q14
US$
2,268.0
(1,817.8)
450.3
435.4

% NR
100.0%
-80.1%
19.9%
19.2%

%
QoQ
-6.9%
-4.8%
-15.8%
-15.5%

4Q13
US$
2,047.3
(1,839.4)
207.9
196.6

% NR
100.0%
-89.8%
10.2%
9.6%

2014
2013
%
YoY
US$
% NR
US$
% NR
3.1%
8,583.4
100.0% 8,411.1
100.0%
-5.9%
(7,189.4)
-83.8% (7,565.7) -89.9%
82.3%
1,394.0
16.2%
845.4
10.1%
87.1%
1,352.2
15.8%
810.1
9.6%

%
YoY
2.0%
-5.0%
64.9%
66.9%

PG.

29

Tables and Charts

Graph I - JBS Consolidated Exports Breakdown in 2014 and 2013
South America
15.9%

Others
8.7%

Canada
2.4%

Africa and Middle East

12.3%

South Korea
5.0%

2014
US$16,223.2
million

E.U.
6.4%

Greater China
11.8%

Russia
6.8%
USA
8.6%
Mexico
11.3%

Japan
10.8%

Growth of 38% in 2014 exports

compared to 2013

South America 15.5%

Others 12.7%

Mexico 14.2%

Canada 3.3%

2013
US$11,760.6
million

South Korea 4.9%

Russia 5.8%

Africa and Middle East 11.4%

E.U. 6.0%

USA 6.5%
Greater China 9.8%
Note 1. Considers China and Hong Kong

Japan 10.1%

Table I 4Q14 Breakdown of Production Costs by Business Unit (%)

4Q14 (%)
Raw material (livestock)

Consolidated

JBS Mercosul

JBS Foods

USA Beef

USA Pork

USA Chicken

82.7%

86.2%

59.7%

88.1%

83.6%

53.2%

Processing (including
ingredients and packaging)

8.8%

7.3%

28.5%

5.0%

7.0%

28.9%

Labor Cost

8.5%

6.5%

11.8%

6.9%

9.4%

17.9%

PG.

30

Capital Markets
JBS share price ended 2014 quoted at R$11.20 in the So Paulo Stock Exchange (BM&FBovespa), an appreciation of 27.7%
compared with 2013. The Companys market value totaled R$32,968.8 million in 2014.
JBS stock was among the 10 shares with the best performance in the Ibovespa index and one of the largest performance in the
food sector. Ibovespa index decreased 2.9% last year
150%
140%
130%
120%

110%
100%
90%
80%
Jan-14 Feb-14 Mar-14

Apr-14 May-14 Jun-14

JBSS3

Jul-14

Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

Ibovespa

Dividend Policy and Payment Evolution

The minimum mandatory dividend of JBS is 25% of net income as provided for in the Corporations Act and by the Companys
bylaws, based upon the non consolidated financial statements. The declaration of annual dividends, including dividends in
excess of the minimum mandatory dividend, requires approval at the Annual General Shareholders Meeting by a majority vote
of the shareholders of JBS and will depend on various factors. These factors include operational results, financial condition,
cash requirements and future prospects of the Company among other factors that the board of directors and shareholders of
JBS deem relevant.
JBS distributed dividends and interest on shareholders' equity to its shareholders in the amount of R$0.8 million for 2002,
R$21.8 million for 2004, R$31.7 million for 2005, R$11.2 million related to 2006, R$17.5 million for 2007, R$12.3 million for 2008
and R$61.5 million for 2009. There were no dividend payments for 2010 and 2011, since the Company recorded losses in this
period, in 2012 JBS distributed R$170.7 million and in 2013 distributed R$220,1 million.

The company has declared dividends in December 31, 2014 of R$483.5 million to be submitted at the General Meeting of
Shareholders, calculated as follows:
In thousand R$
Net income of the year
Legal reserve - (5%)
Adjusted base for dividends calculation
Mandatory dividends (25%)
Declared dividends

2014
2,035,910
(101,795)
1,934,115
483,529
483,529

2013
926,907
(46,345)
880,562
220,140
220,140

PG.

31

Adherence to the Arbitration Chamber

The Company, its shareholders, directors and members of the Fiscal Council undertake to resolve through arbitration any
dispute or controversy that may arise between them related to or resulting from in particular the application, validity,
effectiveness, interpretation, violation and effects of the provisions contained in the Contract of the Novo Mercado, the Listing
Rules of the Novo Mercado, the Bylaws, the shareholders' agreements filed at the Company's headquarters under Corporate
Law, the regulations issued by the National Monetary Council, by the Central Bank of Brazil, by the CVM, by BOVESPA and
any other rules applicable to the operation of the capital market in general to the market Arbitration Chamber in accordance
with Commitment Clauses and Arbitration Rules, conducted in accordance with the Chamber Regulation.

Relationship with External Audit

BDO RCS Auditores Independentes SS was hired by JBS SA for the provision of external audit services related to audits of
financial statements of JBS SA, individual and consolidated.
JBS policy to hire eventual services not related to external audit from the independent auditor is based on principles that
preserve the independency of the auditor, such as: (a) the auditor should not audit its own work, (b) the auditor should not
exercise managerial functions in its client and (c) the auditor should not promote the interests of its client.
The auditors payment refers to professional services related to the audit process of consolidated financial statements,
quarterly revisions of the Companys financial statements, corporate audits and some temporary revisions of certain
subsidiaries, as per request by the appropriate legislation. Payments related to the audit process refers to services of due
diligence traditionally performed by an external auditor in acquisitions and advisory regarding accountancy standards and
transactions.
Payments not related to audit process corresponds to, mainly, services provided of compliance with the tax requirements to
the Companys subsidiaries out of Brazil.
Aiming to be in compliance with CVM Instruction 381/200, JBS S.A. informs that BDO RCS Auditores Independentes did not
provide any other services unrelated to the audit that represented more than 5% of its total payment regarding audit process
during 2014.

PG.

32

JBS S.A.
Financial
statements
auditors' report
As of December 31, 2014 and 2013

and

Independent




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JBS S.A.
Balance sheets
(In thousands of Reais)
Company
Note

December 31,
2014

Consolidated

December 31,
2013

December 31,
2014

December 31,
2013

ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade accounts receivable, net
Inventories
Biological assets
Recoverable taxes
Prepaid expenses
Other current assets

5
6
7
8
9

9,503,923
3,502,612
2,417,608
1,310,521
17,449
416,599

5,223,978
4,087,073
2,414,148
1,275,614
10,171
309,988

14,910,427
9,577,548
8,273,110
1,567,866
2,300,624
181,881
730,776

9,013,147
8,919,926
6,904,616
1,419,343
2,003,256
152,425
500,770

17,168,712

13,320,972

37,542,232

28,913,483

3,160,451
779,147
506,785

1,784,948
682,571
294,254

370,072
633,689
1,546,038
2,121,092

733,958
496,903
1,149,725
1,182,302

4,446,383

2,761,773

4,670,891

3,562,888

10,161,077
10,590,430
9,550,264

11,594,353
9,392,336
9,547,037

295,350
24,098,697
15,436,512

277,571
20,940,616
14,975,663

TOTAL NON-CURRENT ASSETS

34,748,154

33,295,499

44,501,450

39,756,738

TOTAL ASSETS

51,916,866

46,616,471

82,043,682

68,670,221

TOTAL CURRENT ASSETS

NON-CURRENT ASSETS
Long-term assets
Credits with related parties
Biological assets
Recoverable taxes
Other non-current assets

10
8
9

Total long-term assets

Investments in associate, subsidiaries and joint ventures

Property, plant and equipment, net
Intangible assets, net

11
12
13

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Balance sheets
(In thousands of Reais)
Company
Note

December 31,
2014

Consolidated

December 31,
2013

December 31,
2014

December 31,
2013

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Trade accounts payable
Loans and financings
Income taxes
Payroll, social charges and tax obligation
Declared dividends
Payables related to facilities acquisitions
Other current liabilities

14
15/16
18
18
19
20

1,567,402
9,567,475
369,756
484,013
47,894
740,635

1,371,205
6,839,122
382,741
220,494
95,853
535,352

6,942,933
13,686,975
505,799
2,105,278
484,013
344,881
798,122

5,342,388
9,430,892
19,760
1,741,536
220,494
264,264
689,535

12,777,175

9,444,767

24,868,001

17,708,869

13,689,084
151,199
44,904
1,172,511
178,426
29,744

13,753,849
125,166
62,754
1,090,973
164,051
23,123

26,392,165
639,114
490,461
2,839,966
705,844
465,606

23,330,449
705,179
463,485
2,119,594
849,324
360,067

15,265,868

15,219,916

31,533,156

27,828,098

Capital stock
Treasury shares
Capital transaction
Capital reserve
Revaluation reserve
Profit reserves
Valuation adjustments to equity in subsidiaries
Accumulated translation adjustments in subsidiaries

21,506,247
(451,700)
90,338
212,793
87,877
4,261,815
101,658
(1,935,205)

21,506,247
(595,849)
86,444
211,879
92,227
2,705,084
132,787
(2,187,031)

21,506,247
(451,700)
90,338
212,793
87,877
4,261,815
101,658
(1,935,205)

21,506,247
(595,849)
86,444
211,879
92,227
2,705,084
132,787
(2,187,031)

Attributable to controlling interest

23,873,823

21,951,788

23,873,823

21,951,788

1,768,702

1,181,466

TOTAL CURRENT LIABILITIES

NON-CURRENT LIABILITIES
Loans and financings
Payroll, social charges and tax obligation
Payables related to facilities acquisitions
Deferred income taxes
Provision for lawsuits risk
Other non-current liabilities

15/16
18
20
21
22

TOTAL NON-CURRENT LIABILITIES

EQUITY

23

Attributable to noncontrolling interest

TOTAL EQUITY

23,873,823

21,951,788

25,642,525

23,133,254

TOTAL LIABILITIES AND EQUITY

51,916,866

46,616,471

82,043,682

68,670,221

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Statements of income for the years ended on December 31, 2014 and 2013
(In thousands of Reais)
Company
Note
NET REVENUE

24

2014

Consolidated
2013

2014

2013

26,110,898

20,975,955

120,469,719

92,902,798

Cost of goods sold

(20,401,293)

(15,808,619)

(101,796,347)

(81,056,088)

GROSS INCOME

5,709,605

5,167,336

18,673,372

11,846,710

(1,610,677)
(2,739,927)
(2,851,395)
3,903,909
(403,721)

(1,072,208)
(2,183,117)
(1,648,833)
939,189
(10,251)

(3,330,042)
(7,154,335)
(3,637,620)
26,103
(385,655)

(2,519,993)
(5,262,199)
(2,380,331)
6,722
84,086

(3,701,811)

(3,975,220)

(14,481,549)

(10,071,715)

2,007,794

1,192,116

4,191,823

1,774,995

OPERATING INCOME (EXPENSE)

General and administrative expenses
Selling expenses
Financial expense, net
Equity in earnings of subsidiaries
Other income (expenses), net

25
11
26

NET INCOME BEFORE TAXES

Current income taxes
Deferred income taxes

21
21

NET INCOME

46,851
(18,735)
28,116

2,035,910

2,380
(267,589)
(265,209)

(1,656,879)
(128,517)
(1,785,396)

926,907

2,406,427

1,118,325

2,035,910
370,517

926,907
191,418

2,406,427

1,118,325

ATTRIBUTABLE TO:
Controlling interest
Noncontrolling interest

(166,231)
(490,439)
(656,670)

Net income basic per shares - in reais

27

706.49

323.32

706.49

323.32

Net income diluted per shares - in reais

27

706.49

323.32

706.49

323.32

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Statement of comprehensive income for the years ended on December 31, 2014 and 2013
(In thousands of Reais)

Company
2014
Net income

2,035,910

Consolidated
2013
926,907

2014
2,406,427

2013
1,118,325

Other comprehensive income

Valuation adjustments to equity in subsidiaries
Accumulated adjustment of conversion in subsidiaries
Exchange variation in subsidiaries

(31,129)
(120,022)
371,848

39,788
(272,239)
677,178

(31,129)
(120,022)
371,848

39,788
(272,239)
677,178

Total of comprehensive income

2,256,607

1,371,634

2,627,124

1,563,052

Total of comprehensive income attributable to:

Controlling interest
Noncontrolling interest

2,256,607
-

1,371,634
-

2,256,607
370,517

1,371,634
191,418

2,256,607

1,371,634

2,627,124

1,563,052

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Statements of changes in equity for the years ended on December 31, 2014 and 2013
(In thousands of Reais)

Capital
stock
BALANCE AS OF DECEMBER 31, 2012

21,506,247

Capital
transactions
77,374

Capital
reserve
211,879

Revaluation
reserve

Profit reserves
Statutory for
Legal
expansion

96,847

43,715

1,949,982

Net income of the year

Other comprehensive income of the year
Total of comprehensive income, net of taxes

Capital transaction
Transfer of treasury shares
Realization of revaluation reserve
Proposed dividends
Legal reserve
Statutory for expansion
Noncontrolling interest

9,070
-

(4,620)
-

46,345
-

665,042
-

92,227

90,060

2,615,024

BALANCE AS OF DECEMBER 31, 2013

21,506,247

86,444

211,879

Net income of the year

Other comprehensive income of the year
Total of comprehensive income, net of taxes

Capital transactions
Purchase of treasury shares
Transfer of treasury shares
Stock option premium (Note 23b)
Realization of revaluation reserve
Proposed dividends
Legal reserve
Statutory for expansion
Noncontrolling interest

3,894
-

914
-

90,338

212,793

BALANCE AS OF DECEMBER 31, 2014

21,506,247

Treasury
shares
(776,526)
180,677
(595,849)
-

(4,350)
-

101,795
-

1,454,936
-

(64,235)
208,384
-

87,877

191,855

4,069,960

(451,700)

Valuation
adjustments to
equity
92,999
39,788
39,788
132,787
(31,129)
(31,129)
101,658

Accumulated
translation
adjustments
(2,591,970)
404,939
404,939
(2,187,031)
251,826
251,826
(1,935,205)

Retained
Earnings
926,907
926,907
4,620
(220,140)
(46,345)
(665,042)
2,035,910
2,035,910
4,350
(483,529)
(101,795)
(1,454,936)
-

Total

Noncontrollin
interest

Total equity

20,610,547

822,759

21,433,306

926,907
444,727
1,371,634

191,418
191,418

1,118,325
444,727
1,563,052

9,070
180,677
(220,140)
-

167,289

9,070
180,677
(220,140)
167,289

21,951,788

1,181,466

23,133,254

2,035,910
220,697
2,256,607

370,517
370,517

2,406,427
220,697
2,627,124

3,894
(64,235)
208,384
914
(483,529)
23,873,823

216,719
1,768,702

3,894
(64,235)
208,384
914
(483,529)
216,719
25,642,525

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Statements of cash flows for the years ended on December 31, 2014 and 2013
(In thousands of Reais)

Company
2014
Cash flow from operating activities
Net income attributable to controlling interest
Adjustments to reconcile net income to cash provided on operating activities
. Depreciation and amortization
. Allowance for doubtful accounts
. Equity in earnings of subsidiaries
. Loss on assets sales
. Deferred income taxes
. Current and non-current financial charges
. Provision for lawsuits risk
. Gain on bargain purchase

Decrease (increase) in operating assets

Trade accounts receivable
Inventories
Recoverable taxes
Other current and non-current assets
Related party receivable
Biological assets
Increase (decrease) operating liabilities
Trade accounts payable
Other current and non-current liabilities
Noncontrolling interest
Valuation adjustments to equity in subsidiaries

2,035,910

926,907

2,035,910

926,907

570,514
495
(3,903,909)
6,623
18,735
3,249,521
14,375
-

515,215
375
(939,189)
8,220
267,589
1,354,307
8,895
-

2,546,777
(9,218)
(26,103)
1,905
128,517
3,871,245
(104,597)
-

2,038,817
11,459
(6,722)
7,984
490,439
1,591,257
52,477
(72,337)

1,992,264

2,142,319

8,444,436

5,040,281

977,377
(3,460)
(137,020)
(309,299)
1,227,184
-

(1,387,750)
(294,557)
(6,283)
(234,389)
(500,820)
-

148,951
219,384
-

Changes in operating assets and liabilities

2,123,117

Net cash provided by operating activities

4,115,381

Cash flow from investing activities

Additions to property, plant and equipment and intangible assets
Net effect of Joint Venture deconsolidation
Decrease in investments in subsidiaries
Net effect of working capital of acquired / merged company
Net cash provided by (used in) investing activities
Cash flow from financing activities
Proceeds from loans and financings
Payments of loans and financings
Payments of dividends
Stock option premium received
Capital transactions
Shares acquisition of own emission
Net cash provided by financing activities

Consolidated
2014
2013

2013

(1,790,441)
1,927,565
137,124

10,512,737
(10,204,309)
(219,885)
3,132
(64,235)

331,204
224,367
(1,868,228)
274,091

241,816
(890,300)
(22,302)
(717,206)
484,621
(720,305)

(2,026,347)
(142,024)
(171,962)
(297,446)
(84,879)
(338,899)

1,113,016
745,835
370,517
(63,093)

340,744
85,512
191,418
(55,351)

542,599

(2,499,234)

8,987,035

2,541,047

(1,019,292)
(281,975)
915

(3,569,434)
(707,411)

(1,737,313)
(8,623)
1,540
(161,517)

(1,300,352)

(4,276,845)

(1,905,913)

10,745,707
(7,887,692)
(170,396)
(2,364)

24,655,475
(23,501,506)
(219,885)
3,132
3,894
(64,235)

21,703,197
(18,833,041)
(170,396)
9,070
(2,364)

27,440

2,685,255

876,875

2,706,466

310,215

288,460

Variance in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

4,279,945
5,223,978

1,658,994
3,564,984

5,897,280
9,013,147

3,630,060
5,383,087

Cash and cash equivalents at the end of the year

9,503,923

5,223,978

14,910,427

9,013,147

Effect of exchange variation on cash and cash equivalents

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Economic value added for the years ended on December 31, 2014 and 2013
(In thousands of Reais)
Company
2014
Revenue
Sales of goods and services
Other net income (expenses)
Allowance for doubtful accounts
Goods
Cost of services and goods sold
Materials, energy, services from third parties and others

Gross added value

Depreciation and Amortization

Consolidated
2013

2014

2013

27,284,701
3,382
(495)

22,064,641
3,240
(375)

122,582,175
(7,249)
9,218

94,293,533
(4,166)
(11,459)

27,287,588

22,067,506

122,584,144

94,277,908

(17,008,255)
(3,769,725)

(13,176,463)
(3,438,424)

(79,448,209)
(16,901,535)

(63,579,294)
(13,660,224)

(20,777,980)

(16,614,887)

(96,349,744)

(77,239,518)

6,509,608

5,452,619

26,234,400

17,038,390

(2,546,777)

(2,038,817)

(570,514)

(515,215)

Net added value generated by the company

5,939,094

4,937,404

23,687,623

14,999,573

Net added value by transfer

Equity in earnings of subsidiaries
Financial income
Others

3,903,909
4,578,894
4,106

939,189
4,746,460
5,997

26,103
5,965,140
335,322

6,722
5,467,859
122,661

14,426,003

10,629,050

30,014,188

20,596,815

2,414,735
117,200
91,546

1,609,547
203,659
80,240

10,113,201
1,615,262
118,249

7,683,492
1,480,071
96,442

2,623,481

1,893,446

11,846,712

9,260,005

495,456
1,750,215
17,564

383,583
974,663
15,408

2,667,638
2,322,523
21,041

976,463
1,124,151
17,327

2,263,235

1,373,654

5,011,202

2,117,941

7,373,316
93,434
36,627

6,342,572
68,381
24,090

9,880,970
396,095
472,782

7,681,477
312,606
106,461

7,503,377

6,435,043

10,749,847

8,100,544

2,035,910
-

926,907
-

2,035,910
370,517

926,907
191,418

2,035,910
14,426,003

926,907
10,629,050

2,406,427
30,014,188

1,118,325
20,596,815

NET ADDED VALUE TOTAL TO DISTRIBUTION

Distribution of added value
Labor
Salaries
Benefits
FGTS (Brazilian Labor Social Charge)

Taxes and contribution

Federal
State
Municipal

Capital Remuneration from third parties

Interests and exchange variation
Rents
Others

Owned capital remuneration

Net income attributable to controlling interest
Noncontrolling interest
ADDED VALUE TOTAL DISTRIBUTED

The accompanying notes are an integral part of the financial statements.

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
1

Operating activities
JBS S.A (JBS, the Company) is a listed company in the "Novo Mercado" segment, based in the city of So Paulo, Brazil, which requires the highest level of corporate
governance in the Brazilian market and its shares are traded on the BM&F Bovespa S.A - Stock Exchange, Commodity and Forward as ticker symbol "JBSS3" and
American Depository Receipts traded over the counter as "JBSAY".
The Company and its subsidiaries have the following operational activities:
a) Activities in Brazil
In Company
The Company is engaged in the operation of slaughter facilities, cold storage of cattle meat, meat processing operations for the production of beef, meat by-products
and canned goods, through fifty-two industrial facilities based in the States of Acre, Bahia, Gois, Maranho, Minas Gerais, Mato Grosso do Sul, Mato Grosso, Par,
Rio de Janeiro, Rondnia and So Paulo.
The Company distributes its products through eleven distribution centers based in the States of Amazonas, Bahia, Cear, Minas Gerais, Pernambuco, Paran, Rio de
Janeiro, Rio Grande do Sul, Santa Catarina, So Paulo and Distrito Federal.
The Company has strong leather tanning operations, most of its production intended to export in the segments of leather for furniture, automotive, footwear and
artifacts, in the stages of Wet Blue, Semi Finished and Finished. The structure is composed of twenty industrial facilities based in the States of Bahia, Cear, Esprito
Santo, Gois, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Par, Rio Grande do Sul, Rondnia, So Paulo and Tocantins. JBS has one distribution center based
in the State of Mato Grosso do Sul and a warehouse in the State of So Paulo.
Additionally, the Company operates in the segment of steel cans production, industrial waste management and plastic resin manufacturing; bar soap and soap
production for its own brands of cleaning and hygiene segment; production of biodiesel, glycerin, olein and fatty acid; purchase and sale of soybeans, tallow, palm oil,
caustic soda, stearin; industrialization and sale of cattle tripe; own transport operations for retail sale, cattle for slaughter and export products; industrialization of
collagen; industrialization of dog biscuits. The Company also has stores named "Mercado da Carne" that sell meat and barbecue related items directly to customers.
The Company is also engaged in the production and distribution of electric power and cogeneration.
In subsidiaries / Joint Ventures
JBS Confinamento Ltda. (JBS Confinamento) is based in the State of So Paulo in the city of Castilho and Guaiara, State of Gois in the city of Nazrio and Aruan,
in the State of Mato Grosso in the city of Lucas do Rio Verde and also in the State of Mato Grosso do Sul in the city of Terenos, is engaged in the activity of buying and
reselling for fattening beef and providing services of fattening beef and third party cattle for slaughtering.
The indirect subsidiary Meat Snacks Partner do Brasil Ltda. (Meat Snacks), a joint venture with shared control between the Company and the third party company Jack
Link Beef Jerky, based in Santo Antnio da Posse and Lins, State of So Paulo, produces Beef Jerky purchasing fresh meat in the domestic market and exports to the
United States of America.
Brazservice Wet Leather S.A. (Brazservice), based in the State of Mato Grosso, in the city of Pedra Preta, has as main activity the process of leather industrialization
and marketing.
Tannery do Brasil S.A. (Tannery), based in the State of Mato Grosso, in the city of Cceres, has as main activity the process of leather industrialization and marketing.
In JBS Foods S.A., the subsidiary Seara Alimentos Ltda. (Seara Alimentos) based in the State of So Paulo, explores the activity of industrialization and
commercialization of food products, breeding activity of broiler chickens and hogs for slaughtering, production of pet food and concentrates and meat industrialization. It
operates thirty industrial facilities based in the States of Bahia, Minas Gerais, Mato Grosso, Mato Grosso do Sul, Paran, Rio de Janeiro, Rio Grande do Sul, Santa
Catarina, So Paulo and Distrito Federal and twelve warehouses in the States of Bahia, Cear, Minas Gerais, Mato Grosso, Mato Grosso do Sul, Pernambuco, Rio de
Janeiro, Paran, Rio Grande do Sul, Rio Grande do Norte, So Paulo and Distrito Federal. It also has a private warehouse based in the State of Santa Catarina.
In JBS Foods S.A., the subsidiary JBS Aves Ltda. (JBS Aves), based in State of So Paulo, explores the activity of industrialization and commercialization of food
products, breeding activity of broiler chickens and hogs for slaughtering, production of pet food and meat industrialization. It operates eight industrial facilities base in
the States of Rio Grande do Sul, Santa Catarina, Paran e Mato Grosso do Sul and two warehouses in the States of Rio Grande do Sul and So Paulo. JBS Aves also
operates the activities of exploring warehouses through the subsidiary Agil Armazns Gerais Imbituba Ltda.
In JBS Foods S.A., the subsidiary Braslo de Produtos de Carnes Ltda. (Braslo), based in the State of So Paulo, has as main activity the industrialization and
commercialization of food products in two industrial facilities based in the State of So Paulo e Distrito Federal.
In JBS Foods S.A., the subsidiary Comrcio e Indstria de Massas Alimentcias - Massa Leve Ltda. (Massa Leve), based in the State of So Paulo, has as main activity
the industrialization and market of fresh pasta and industrialized products. It operates in two industrial facilities based in the States of So Paulo and Pernambuco.
In JBS Foods S.A., the subsidiary Excelsior Alimentos S.A. (Excelsior), direct subsidiary of JBS Foods S.A. and indirect of the holding Baumhardt Comrcio e
Participao Ltda. (Baumhardt), based in the State of Rio Grande do Sul, in the city of Santa Cruz do Sul, has as main activity the production of industrialized products.
It operates an industrial facilities of built-in meat in the State of Rio Grande do Sul.
In JBS Foods, S.A., the subsidiary Macedo Agroindutrial Ltda. (Tyson), based in Curitiba, State of Paran, has as main activity the industrialization and
commercialization of food products, breeding activity of broiler chickens for slaughtering, production of pet food and meat processing operations for the production of
beef, meat by-products in three industrial facilities based in the State of Santa Catarina.
In addition, JBS Foods S.A. also operates the following companies with less representativeness through Enersea Comercializadora de Energia Ltda. (Enersea), in
which has as main activity the commercialization of energy; DBF Participaes Societrias Ltda. (Avebom), in which has as main activity the industrialization and
commercialization of food products, breeding activity of broiler chickens and hogs for slaughtering, production of pet food and concentrates and meat industrialization;
MBL Alimentos Ltda. (MBL), in which has breeding activity of hogs; Sul Valle Alimentos Ltda., has as main activity commercialization and the industrialization of
derivative products of breeding activity of hogs for slaughtering; Novagro Granja Avcola Ltda., in which has as main activity the commercialization of food products,
breeding activity of broiler chickens for slaughtering, production of pet food and concentrates. The companies, Penasul Alimentos Ltda., Agrofrango Ltda., DaGranja
Industrial Ltda., and Ibirapuera Avcola Ltda., in which have their operations performed by Seara Alimentos Ltda., by leasing its industrial facilities.
b) Activities abroad
JBS Argentina S.A. (JBS Argentina), an indirect wholly-owned subsidiary of the Company, based in Argentina, operates slaughter facilities and cold storage facilities for
the production of beef, canned goods, fat, pet food and beef products, and has six industrial facilities based in the provinces of Buenos Aires, Santa F and Crdoba.

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
JBS USA divides its operation into three categories: Beef, operating the segment of bovine products, Pork, operating the segment of pork and lamb products and
chicken, operating the segment of chicken acquired through the business combination of Pilgrims Pride (PPC).
JBS USA Holdings Inc. (JBS USA) and its subsidiaries process and prepare fresh, further processed and value-added beef, pork, chicken and lamb products for sale to
customers in the United States of America and in international markets. Additionally, through its subsidiaries JBS USA offers transport services as well as importing
activities of manufactured products, processed meat, and other food items for sale in the North American market and Europe.
In the United States of America, JBS USA operated nine beef processing facilities, three pork processing facilities, one lamb slaughter facility, three value-added
facilities and eleven feedyards. In Australia operated ten processing facilities, four value-added facilities and five feedyards, composed by (four of the processing
facilities process beef and lamb; one facility processes beef, lamb, and pork; and the remaining five facilities process solely beef). The Company operated one beef
processing facility and one feedyard in Canada.
Part of JBS USA, Pilgrim's Pride - PPC based in Greeley, Colorado, United States of America is one of the largest chicken processors in the United States of America,
listed company in NASDAQ, with operations in Mexico and Puerto Rico. Exporting commodities to over ninety countries, the main products are "in-natura", whole chilled
or chilled parts. The main customers are restaurant chains, food processors, distributors, supermarkets, wholesalers, distributors and other retail, and export to Eastern
Europe (including Russia), Far East (including China), Mexico and other world markets. The Company also operated twenty seven chicken processing facilities,
supported by twenty eight feed mills, thirty six hatcheries, eight rendering facilities, five processing facilities and three pet food facilities in the United States and Mexico.
The indirect subsidiary Nawelur S.A., based in So Jos, Uruguay, is engaged in the trading of leathers in the local market.
JBS Toledo NV (Toledo), an indirect wholly-owned subsidiary of the Company, based in Belgium, has basically trading operations for the european and african markets,
selling cooked meat. Additionally, it develops logistics operations, warehousing, customization and new products development.
JBS Paraguay S.A (JBS Paraguay), an indirect wholly-owned subsidiary of the Company, based in Assuno, as well as in San Antonio, slaughters and processes
chilled and frozen beef and raw leather. Most of its production is destined to export to others subsidiaries of JBS Group. It is licensed to export to the European Union,
Chile, Russia and other markets.
Frigorfico Canelones S.A (Frigorfico Canelones), an indirect wholly-owned subsidiary of the Company, based in Canelones, Uruguay, slaughters and processes in
natura beef for export, and for local markets. Also sells meat cuts with bones, mainly to the local market.
Rigamonti Salumificio SpA (Rigamonti), an indirect wholly-owned subsidiary of the Company, based in Italy, leads the Italian market in the production and sale of
Bresaola (bovine cured beef). Additionally, Rigamonti is engaged in the production and sales of beef jerky and flat cured pork belly (bacon), as well as the
commercialization of cured ham.
Trump Asia Enterprises Limited (Trump), an indirect wholly-owned subsidiary of the Company, has one leather processing plants, based in Bien Hoa, Vietnam, engaged
in the leather industrialization for the furniture market. It has two sales offices in Hong Kong and Dongguan, which sell in the Asian market and buy most of its products
from JBS Group and third parties.
JBS Leather Italia S.R.L. (JBS Leather Italia), based in the city of Arzignano with another plant in the city of Matera, both in Italy, operates in the leather segment,
buying leather from JBS Group and trading in domestic and European market, producing leather in Semi Finished and Finished stages.
Capital Joy Holding Limited (Capital Joy), based in British Virgin Islands, has a leather processing plant in the city of Jiangmen in China, whose activity consists in the
process of leather industrialization to be sold mostly to the Asian market of production of shoes and artifacts, buying the "Wet Blue" stage from JBS Group.
Columbus Netherlands B.V. (Columbus), based in Netherlands, operates in its subsidiaries the activity of production and marketing of leather in stages of Semi Finished
and Finished to the markets of shoes and furniture. In addition, it manufactures finished leathers for the automotive industry. It operates units located in Uruguay,
Argentina, Mexico and South Africa, and distribution centers in the United States and Germany.
The indirect subsidiary Seara Holding Europe B.V. (Seara Holding), based in the city of Amsterdam, operates in its subsidiaries the activity of sale e purchase of
products to the foreign market, which main activity is in the European market. It also operates with two commercial offices, based in Japan and Singapore.
c) Acquisition of the operations of Zenda's Group and Seara's Group:
The consolidated financial statements of the Company of the years ended on December 31, 2014 and 2013, reflect the acquisitions of Zenda's Group (through the
holding Columbus) and Seara's Group (through the holdings JBS Foods Ltda., Seara Holding and Baumhardt).
Due to the fact of the Statements of Income for the year ended on December 31, 2014 include the results of the twelve months of Zenda and Seara's Group, and in the
previous year the investment of Zenda's Group include only the result of six months, equivalent to the second 2013 semester of Zenda's Group and three months,
equivalent to the fourth 2013 semester of Seara's Group, for comparison purposes, below is presented the statement of income excluding the first semester of the year
2014 of Zenda's Group, and nine months of the year 2014 of Seara's Group consolidated participations on December 31, 2014, allowing readers and users a better
comparability.

10

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Statements of Income:
Nine months period
ended on December
2014

2014

Consolidated

Seara's Group

Six months period

ended on June,
2014

2014

2013

Zenda's Group

Consolidated
excluding Seara and
Zenda's Group

Consolidated
excluding Seara and
Zenda's Group

Net sales revenue

120,469,719

7,322,043

278,847

112,868,829

92,902,798

Cost of goods sold

(101,796,347)

(5,414,652)

(249,493)

(96,132,202)

(81,056,088)

18,673,372

1,907,391

29,354

16,736,627

11,846,710

(10,484,377)

(1,134,328)

(22,886)

(9,327,163)

(7,782,192)

(3,637,620)

(289,613)

(3,348,184)

(2,380,331)

(385,655)

(29,113)

(1,493)

(355,049)

26,103

26,103

(1,785,396)

(95,196)

(3,020)

(1,687,180)

2,406,427

359,141

2,132

2,045,154

1,118,325

ATTRIBUTABLE TO:
Controlling interest
Noncontrolling interest

2,035,910
370,517

359,885
(744)

2,132
-

1,673,893
371,261

926,907
191,418

Net income

2,406,427

359,141

2,132

2,045,154

1,118,325

GROSS INCOME
General, administrative and selling expenses
Financial expense, net
Other income (expenses), net
Equity in earnings of subsidiaries
Income taxes

NET INCOME

177

84,086
6,722
(656,670)

* Composed by the results of the subsidiaries Baumhardt, Seara Holding and JBS Foods Ltda.

Elaboration and presentation of financial statements

a. Declaration of conformity
These financial statement includes:
- The Company financial statements were prepared and in accordance with International Financing Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB), and also in accordance with pronouncements, interpretations and orientations of Brazilian Accounting Pronouncements Committee (Comit de
Pronunciamentos Contbeis - CPC) approved by resolutions of the Brazilian Federal Accounting Council (Conselho Federal de Contabilidade - CFC) and requirements
of the Brazilian Securities Commission - CVM.
- The individual financial statements were prepared in accordance with accounting practices adopted in Brazil, in compliance with the Law of joint stock companies (Lei
das sociedades por aes - Leis das SA's), considering the amendments made by Brazilian Laws 11.638/07 and 11.941/09 and pronouncements, interpretations and
orientations of Brazilian Accounting Pronouncements Committee (Comit de Pronunciamentos Contbeis) - CPC approved by resolutions of the Brazilian Federal
Accounting Council (Conselho Federal de Contabilidade) - CFC, and requirements of the Brazilian Securities Commission - CVM.
The individual financial statements present the evaluation of investments in associates, subsidiaries and joint ventures by the equity method.
IAS 27 (Separate Financial Statements) was reissued in 2014, allowing that under international accounting practices (IFRS) the equity pickup method can be used to
measure the investments in subsidiaries, joint ventures and associates. In December 2014, CVM issued the Resolution 733/2014, which approved the Document for
Review of Accounting Pronouncements 7 referring to pronouncements CPC 18, CPC 35 and CPC 37 issued by Brazilian Accounting Pronouncements Committee
(Comit de Pronunciamentos Contbeis - CPC), including IAS 27 review, and started allowing such adoption at year ending on or after December 31, 2014. Thereby,
the individual financial statements of the parent Company started to comply with IFRS, as from this year.
The financial statements of subsidiaries presented prior to the first time adoption of IFRS are adjusted to the policies adopted by the Group - International Financing
Reporting Standards (IFRS).Thus, the balance sheets of subsidiaries have been prepared with international accounting uniform policies and practices. Similarly, for the
new investments acquisitions after adoption of IFRS, IFRS 3 (R)/CPC 15 R1 - Business Combinations is applied, which presents investment of fair value, subsequently,
evaluating its investments.
b. Normative Statement n 1.397 and Law 12.973/14 (conversion of Provisory Measure (Medida Provisria - MP) n 627 of 2013)
In November 11, 2013 the Provisory Measure (Medida Provisria - MP) 627 was published, in which the conversion into Law 12.973 occurred in May 13, 2014. This
Law revokes the Transition Tax Regime (Regime Tributrio de Transio - RTT), new regulation in regards to taxation of foreing income and among other issues.
The providences of Provisory Measure will take effect in 2015, however it is allowed that the taxpayer opts for anticipating the effects in 2014. The Company and its
subsidiaries, based on the opinion of legal advisors, did not opted by adoption for the Financial Statements as of December, 2014 and it is not expected that its
adoption, in 2015, has relevant effects in its Financial Statements.
c. Approval of financial statements
The approval of these financial statements was given at the Board of Directors' meeting held on March 9, 2015.
d. Functional and presentation currency
These individual and financial statements are presented in Reais (R$), which is the Company's functional currency. All financial information is presented in thousands of
reais.

Significant accounting policies

The main accounting policies used in the preparation of these financial statements, as described below, have been consistently applied over all the reported periods,
unless otherwise stated.
a) Statements of income
Revenue and expenses are recorded on the accrual basis. Revenue is measured at the fair value of the payment received or receivable for sale of products and
services in the Company normal course of business and its subsidiaries.

11

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
In the income statement revenue is net of taxes, returns, rebates and discounts, as well as of intercompany sales. On note 24 is presented net revenue reconciliation.
In accordance with IAS 18/CPC 30 R1 - Revenues, the Company recognizes revenue when, and only when:
(i) the amount of revenue can be measured reliably;
(ii) the entity has transferred to the buyer the significant risks and rewards incidental to ownership over the goods;
(iii) it is probable that the economic benefits will flow to the Company and its subsidiaries;
(iv) the entity neither maintains involvement in the Management of product sold at levels normally associated with ownership nor effective control of such cost of good
sold; and
(v) expenses incurred or to be incurred related to the transaction, can be reliably measured.
The expenses are recorded on the accrual basis.
b) Accounting estimates
In the process of applying the Company's accounting policies, Management made the following judgments which can eventually have a material impact on the amounts
recognized in the financial statements:
impairment of non-financial assets;
impairment of recoverable taxes;
retirement benefits;
measurement at fair value of items related to business combinations;
fair value of financial instruments;
provision for tax, civil and labor risks;
impairment of financial assets;
biological assets; and
useful lives of property, plant and equipment.
The Company reviews its estimates and underlying assumptions used in its accounting estimates on a quarterly basis. Revisions to accounting estimates are
recognized in the financial statements in the period in which the estimates are revised.
The settlement of transactions involving these estimates may result in different amounts due to potential inaccuracies inherent in the process of its determination.
c) Cash and cash equivalents
Cash and cash equivalents include cash balances, banks and financial investments with original maturities of three months or less from the date of the contract. Cash
equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value in accordance with IAS 7/CPC 03 R2 - Statement of Cash Flows. These investments are designed to satisfy the cash commitments of short-term (daily
management of financial resources of the Company and its subsidiaries) and not for investment or other purposes.
d) Trade accounts receivable
Trade accounts receivable correspond to amounts owed by customers in the ordinary course of business of the Company. If the due date is equivalent to one year or
less, the account receivable is classified as current assets. Otherwise, the corresponding amount is classified as noncurrent assets.
Accounts receivable are initially recognized at fair value, subsequently measured at amortized cost, less any impairment. In practice, they are recognized at the invoiced
amount, adjusted to its recoverable value.
e) Allowance for doubtful accounts
Allowance for doubtful accounts of accounts receivable are calculated based on the analysis of the aging list, provisioning the items of long standing, and considering
the probable estimated losses, which the amount is considered sufficient by the Management to cover probable losses on accounts receivable based on historical
losses.
Allowance for doubtful accounts expenses with the constitution of the provision for adjustment to recoverable value are recorded under the caption "Selling Expenses"
in the individual and consolidated statements of income. When no additional recoverability is expected, the account receivable is derecognized.
f) Inventories
In accordance with IAS 2/CPC 16 R1 - Inventories, the inventories are stated at the lower of the average cost of acquisition or production, and the net realizable value.
The cost of inventories is recognized in the income statement when inventories are sold or perishing.
g) Biological assets
In accordance with IAS 41/CPC 29 - Biological Assets, companies that operate with agricultural activities, such as grain crops, increased herd (of cattle feedlot
operations or livestock grazing), and various agriculture crops are required to mark to market these assets, which effect shall be recorded in the income statement of
the year.
The evaluation of biological assets is done on a quarterly basis by the Company, and the gain or loss on change in fair value of biological assets is recognized in the
income statement in the period in which it occurs, in specific line as a reduction of gross revenue.
The registration of biological assets is done through the concept of market to market and cost, according to the criteria defined in the Note 8.
h) Investments in associates, subsidiaries and joint ventures
In the individual financial statements of the Company, the investments in associates, subsidiaries and joint ventures are recognized by the equity method.
In accordance with IAS 28/CPC 18 R2 - Investments in Associates, Subsidiaries and Joint Ventures, Associate is an entity over which an investee has significant
influence, being the power to participate in the financial and operating policy decisions of the investee (but not control or joint control).
According to IAS 31/CPC 19 R2 - Interests in joint venture, Joint ventures are business jointly controlled whereby parties that hold the joint control have rights to the net
assets of the business . The interests in joint ventures are treated as investment and recorded by the equity method, in accordance with IAS28/CPC 18 R2 Investments in associates, subsidiaries and joint ventures.

12

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Exchange differences on foreign currency investments are recognized in equity in the accumulated translation adjustments.
i) Property, plant and equipment - PP&E
The items of property, plant and equipment are valued at historical cost of acquisition or construction, net of accumulated depreciation and impairment.
The interest on loans that are directly attributable to fixed assets acquisition or construction of assets are capitalized as part of the costs of these assets. Borrowing
costs that are not directly related to specific assets (but related to more than one asset) are capitalized based on average interest rate on the balance of construction in
progress. These costs are amortized according to the estimated useful lives of the related assets.
Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, so that the value of cost less its residual value after the useful life
is fully depreciated (except for land and construction in progress). The estimated useful lives, residual values and depreciation methods are reviewed at each reporting
date and the effect of any changes in estimates are accounted for prospectively.
An item is disposed when of there are no future economic benefits resulting from its continued use. Any gains or losses on sale or disposal of fixed assets are
determined by the difference between the amounts received against the carrying value and are recognized in the income statement.
j) Assets leased
Leases which the Company assumes substantially all the risks and benefits of ownership are classified as financial leases, which are registered as financed purchase,
recognizing, at its beginning, a fixed asset and a financial liability. If there is no significant transfer of the risks and inherent benefits of the property, the leases are
classified as operational leases, and are recognized as expenses over the leasing period.
In the Companys individual statements there are only operational leases, the value recognized as financial leasing in the consolidated refers to JBS USA figures.
k) Intangible assets
Consist mostly of goodwill recorded in accordance with IAS 38/CPC 4 R1 - Intangible assets by cost or formation, less amortization and any applicable losses due to
impairment. Amortization, when applicable, is recognized using straight-line method based on the useful lives of assets. The estimated useful lives and amortization
method are reviewed at the end of each financial year and the effect of any changes in estimated are accounted for prospectively.
Goodwill arising from business combination
Goodwill resulting from business combinations is stated at cost at the date of business combination, net of accumulated impairment.
Goodwill is subject to annual impairment testing or more frequently when impairment indications are identified. If the recoverable amount of the cash-generating unit is
less than the carrying value, an impairment loss is recorded. Any impairment loss on the recoverable amount of goodwill is directly recognized in income statement of
the year. The impairment loss is not reversed in subsequent periods.
At the sale of the corresponding cash-generating unit, the goodwill is included in the calculation of profit or loss on disposal.
Impairment of tangible and intangible assets, excluding goodwill
Property, plant and equipment, intangible assets with defined useful lives and other assets (current and noncurrent) are tested for impairment, if indications of potential
impairment exist. Intangible assets are tested for impairment when an indication of potential impairment exists or on an annual basis, regardless of whether or not there
is any indication of impairment, pursuant to IAS 38/CPC 4 R1- Intangible Assets.
After each year end a review is made of the carrying value of tangible and intangible assets to determine whether there is some indication that those assets have
suffered any impairment. If such indication is indentified, the recoverable amount of the asset is estimated in order to measure the amount of such loss, if any.
The recoverable amount is the higher amount between fair value less costs to sell and value in use. In evaluation of value in use, the estimated future cash flows are
discounted to present value by the discount rate before tax that reflects current market assessment of the time value of money and the specific risks to the asset.
If the recoverable amount of an asset is lower than its carrying value, the asset is reduced to its recoverable amount. The loss on the impairment is recognized
immediately in the statement of income and is reversed if there has been a change in the estimates used to determine the recoverable amount. When an impairment
loss is subsequently reversed, there is an increase in amount of the asset due to the revised estimate of its recoverable amount, but it does not exceed carrying amount
that would have been determined if no loss on the impairment had been recognized for the asset in prior years. Reversal of loss on the impairment is recognized directly
in the income statement.
l) Other current and noncurrent assets
Other current and noncurrent assets are stated at cost or realizable value including, if applicable, income earned through the reporting date.
m) Trade accounts payable
Correspond to the amounts owed to suppliers in the ordinary course of business of the Company. If the payment period is equivalent to one year or less, suppliers are
classified as current liabilities. Otherwise, the corresponding amount is classified as noncurrent liabilities. When applicable, are added interest, monetary or exchange
rate.
n) Loans and financings
Loans and financings are recognized at fair value upon receipt of the proceeds, net of transaction costs, when applicable, plus charges, interests and monetary and
exchange rate variation contractually defined, incurred until the end of each period, as shown in note 15.
o) Income tax and social contribution
Current taxes
Current taxes are computed based on taxable income at tax rates in effect, according to prevailing legislation.
Deferred taxes
Deferred income tax (deferred tax) is calculated on the temporary differences between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is
determined using tax rates enacted and expected to be applied when the deferred tax assets are realized or when the income tax liability is settled.
Deferred tax assets are recognized only in proportion to the expectation or likelihood that future taxable income will be available against which the temporary
differences, tax losses and tax credits can be used.

13

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Deferred tax assets and liabilities are offset if there is a legal right to offset current tax assets and liabilities, and they are related to income taxes levied by the same
taxation authority on the same taxable entity.
p) Dividends
Dividend distribution, when applicable, proposed by Management is equivalent to the mandatory minimum dividend of 25% and is recorded under the caption "Declared
Dividends" in liabilities since it is considered a legal obligation established by the Company's laws.
q) Current and noncurrent liabilities
Current and noncurrent liabilities are stated at known or estimated amounts, including, if applicable, charges and monetary or exchange rate variations.
r) Negotiation premium with trading options
The Company, until the year ended on December 31,2014, only traded selling Put option of JBSS3. Thereby, recognizes the premium received as a liability, being
registered on other current liabilities account. On the maturity date (i) the option is in the money and it is exercised or (ii) the options is out of the money and it is not
exercised . Thus, these situations are detailed below:
(i) When the Put option is exercised (JBSS3 stock price is below the strike price of the option) the Company has the obligation to purchase shares at the strike price
minus the premium received at the trade date. The shares are them held in treasury.
(ii) When the Put option is not exercised (JBSS3 stock price is above the strike price of the option), the Put option value is zero and the premium is recognized on a
capital reserve account.
s) Noncontrolling interest
According to IAS 1/CPC 26 R1, Presentation of financial statements, noncontrolling interests are presented in the financial statements within equity, with respective
effects included in the statement of income.
t) Contingent assets and liabilities
According to IAS 37/CPC 25 -Provisions, Contingent Liabilities and Contingent Assets, contingent assets are recognized only when their realization is "virtually certain",
based on favorable final judicial decision. Contingent assets are disclosed where an inflow of economic benefits is probable.
Contingent liabilities are accrued when losses are probable and the amounts can be estimated reliably. Contingent liabilities classified as possible are only disclosed
and contingent liabilities classified as remote are neither accrued nor disclosed.
u) Adjustment of assets and liabilities to present value
The Company presents, when relevant, assets and liabilities at present value long-term assets and liabilities, according to CPC12 - Present value adjustment. The
present value is calculated timely by the Company, and recorded if relevant, being detailed in the notes in which these assets and liabilities refers to.
In the present value calculation adjustment the Company consider the following assumptions: (i) the amount to be discounted; (ii) the dates of realization and
settlement; and (iii) the discount rate.
The discount rate assumption relies on current market valuations as to time value of money and specific risks for each asset and liability.
v) Consolidation
The financial statements includes individual financial statements of the Company, its subsidiaries and joint controlled entities (proportionally consolidated). Control is
obtained when the Company has the power to control financial and operating policies of an entity so as to obtain benefits from its activities.When necessary, the
financial statements of subsidiaries are adjusted according to the accounting policies established by the Group. All transactions, balances, income and expenses
between Group companies are eliminated in the financial statements. Consolidated subsidiaries are detailed described on note 11.
The financial statements of the foreign subsidiaries are originally prepared in the currency of the country in which they are based and, subsequently, are adjusted to
IFRS and translated to Brazilian reais using the exchange rate in effect at the reporting date for assets and liabilities, the historical exchange rate for changes in equity
and the average exchange rate for the period for income and expenses when it is appropriate. Exchange gains and losses are recognized in equity under the caption
"accumulated translation adjustments" in accordance with IAS 21/CPC 2 R2 - The effects of changes in foreign exchange rates.
w) Foreign currency translation
Functional and reporting currency
Transactions in foreign currencies are translated to the respective functional currencies of the Company entities at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The
foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective
interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period.
The items of the financial statements of the subsidiaries are measured using the currency of the primary economic environment in which the subsidiaries operate
("functional currency"), being adjusted to IFRS and translated to Brazilian Real at the corresponding exchange rate of the reporting period for assets and liabilities, the
historical rate for equity and the average exchange rate of the period for the income statement, if applicable, and with the exchange rate effects recognized in
comprehensive income.
x) Earning per share
According to with IAS 33/CPC 41 - Earnings per share, the Company presents the basic and diluted earnings per share data for its common shares:
Basic: Calculated by dividing net income allocated to common shareholders of the Company by the weighted average number of common shares outstanding during the
year.
Diluted: Calculated by dividing net income of the period attributable to common shareholders of the Company by the weighted average number of common shares
outstanding during the year, adjusted for the effects of all dilutive potential common shares, adjusted for own shares held.
y) Financial instruments
Subsequent measurement of financial instruments occurs at each reporting date, according to the rules for each category of financial assets and liabilities.

14

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Financial assets at fair value through profit or loss
Financial asset are classified by its fair value on the financial report if it is classified as held for trading or designated as such upon initial recognition. Financial assets
are designated at fair value through profit or loss if the company manages such investments and makes purchase and sale decisions based on their fair values in
accordance with a documented risk management and investment strategy of the Company. Transaction costs, after initial recognition are recognized in income
statement when incurred. Financial assets recorded at fair value through profit or loss are measured at fair value and changes in fair value of these assets are
recognized in statement of income of the year. The financial instruments classified in this category are "Financial investments" and "Derivatives".
Loans granted and receivables
Loans granted and receivables are financial assets with fixed or estimated payment amounts that are not quoted in an active market. Such assets are initially
recognized at fair value plus any attributable transaction costs. After initial recognition, loans and receivables are measured at amortized cost using the effective interest
method, decreased by any loss on the impairment. The main assets of the Company classified in this category are "cash and cash equivalents", "trade accounts
receivables" and "credits with related parties".
Held to maturity
In the case when the Company intends and is able to hold bonds to maturity, then such financial assets are classified as held to maturity. Investments held to maturity
are initially recognized at fair value plus any directly attributable transaction costs. After initial recognition, investments held to maturity are measured at amortized cost
using the effective interest method, decreased by any loss on the impairment. The Company has no financial instruments in this category.
Non derivative financial liabilities
The Company recognizes debt securities and subordinated debt on the date on which they originated. All other financial liabilities (including liabilities designated at fair
value recorded in income) are initially recognized on the trade date on which the Company becomes a party to the contractual provisions of the instrument. The
Company derecognizes a financial liability when its contractual obligations are canceled or expired. The Company has the following non-derivative financial liabilities:
loans, financing, trade accounts payable, debts with related parties, declared dividends, payables related to facilities acquisitions and other payables.
Impairment of financial assets
Financial assets, except those designated at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Impairment
loss is recognized if, and only if there is any indication that an asset may be impaired as a result of one or more events that occurred after initial recognition, and had an
impact on the future cash flows estimated of this asset.
The financial asset carrying value is reduced directly by the loss of the impairment for all financial assets, except accounts receivable in which the carrying value is
reduced by a loss estimate. Subsequent recoveries of amounts previously written off are credited to the loss estimate. Changes in the carrying value of the loss
estimate are recognized in statement of income.
Derivatives
The Company and subsidiaries recognize and disclose financial instruments and derivatives according to IAS 39/CPC 38 - Financial Instruments: Recognition and
Measurement, IFRIC 9 - Assessment of embedded derivatives and IFRS 7/CPC 40 R1 - Disclosure of Financial Instruments. Financial instruments are recognized after
the Company and its subsidiaries become a party to the contractual provisions at the instruments.
Based on a risk management policy of the JBS Group, the Company and/its subsidiaries, contract financial derivatives instruments in order to minimize the risk of
losses due to the exposure to fluctuation in exchange rates, interest rates, commodities prices, and others, which can affect the valuation of current and noncurrent
assets, future cash flow and profit.
The fair value of derivative instruments is calculated by the treasury department, based on information of each contracted transaction and market information on the
reporting dates such as interest rates and exchange rates.
z) Business combinations
According to IFRS 3 (R)/CPC 15 R1 - Business Combination, business acquisitions are accounted for using the acquisition method at the acquisition date, which is the
date on which control is transferred to the Group . The consideration transferred in a business combination is measured at fair value, which is calculated by adding the
fair values of assets transferred, liabilities incurred on the acquisition date to the previous owners of the acquired shares issued in exchange for control of the acquired.
The acquisition-related costs are generally recognized in income when incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the recognized amount of noncontrolling interests in the acquired business plus the fair
value of the existing equity interest in the acquired less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed. If the
excess is negative, a gain on bargain is recognized immediately in income as a gain.
If the initial accounting for a business combination is incomplete at the closing of the period in which the business combination has occurred, the recording of the
temporary values of items whose accounting is incomplete are made. These temporary figures are adjusted during the measurement period (which shall not exceed one
year from the date of acquisition), or additional assets and liabilities are recognized to reflect new information relating to facts and circumstances existing at the
acquisition date which, if known, would have affected the amounts recognized on that date.
aa) Employee benefits
Defined Contribution Plans:
A defined contribution plan is a plan for post-employment benefits under which an entity pays fixed contributions into a separate entity (Provident Fund) and has no
legal or constructive obligation to pay additional amounts. Obligations for contributions to pension plans to defined contribution plans are recognized as expenses for
employee benefits in income in the periods during which employees render services. Prepaid contributions are recognized as an asset upon condition that
reimbursement of cash or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the
period in which the employee renders service are discounted to their present values.
Defined benefit plans
The amount of the defined benefit plans that will be received by the beneficiaries are previously defined, calculated individually for each of the plan by using actuarial
assumptions. The contributions can be adjusted in order to guarantee the payment of these benefits.
The recognized obligation for these contributions is the present value of the obligation defined in the closing, less the fair value of the assets of the plan, adjusted by
actuarial gains or losses and past service costs.

15

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The discount rate is yield at the reporting date on funds that have maturity dates approximating the terms of the appropriate indirect subsidiary PPC's obligation and that
are denominated in the same currency in which benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit
credit method.
When the calculation results in a benefit for the indirect subsidiary, the asset to be recognized is limited to the total cost of any unrecognized past service and present
value of economic benefits available in the form of future refunds from the plan or reductions in future contributions to the plan . To calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply to any plan in indirect subsidiary. An economic benefit is available to the
indirect subsidiary if it is achievable during the life of the plan or the liquidation of the plan liabilities.
When the benefits of a plan are increased, the portion of the increased benefit relating to past service by employees is recognized in the straight-line method over the
average period until the benefits become vested. To the extent the benefits become vested immediately, the expense is recognized immediately in income.
All actuarial gains and losses arising from defined benefit plans are accounted for in other comprehensive income.
ab) Segment reporting
In accordance with IFRS 8/CPC 22 - Segment reporting - Segment reporting is presented consistently with the internal reports provided to the entity's chief operating
decision maker to make decisions about resources allocations, performance evaluation by segment and strategic decision making process.
ac) Statements of Cash flow
The statements of cash flows have been prepared by the indirect method in accordance with the instructions contained in IAS 7/CPC 3 R2 - Statement of Cash Flows.
ad) Statement of comprehensive income
According to IAS 1/CPC 26 R1 - Presentation of financial statements - The statement of comprehensive income is composed by the conversion rate of foreign
currency investments abroad and equity valuation in investments.
ae) Economic Value Added
In accordance with CPC 9 - Statement of Economic Value Added, the Company included in the financial statements, the Statement of Value Added (EVA), and as
additional information in the financial statements, because it is not a compulsory statement according to IFRS.
The EVA, aims to demonstrate the value of the wealth generated by the Company and its subsidiaries, its distribution among the elements that contributed to the
generation of it, such as employees, lenders, shareholders, government and others, as well as the share of wealth not distributed.
af) New IFRS pronouncements, issues, changes and interpretations issued by the IASB and CPC
Following changes in the existing rules were published during the year of 2014 and have initial adoption to subsequent accounting periods, thereby, from January 1,
2015. There was no anticipated adoption from the Company.
IFRS 9 Financial Instruments outlines the requirements for the classification, measurement and recognition of financial assets and liabilities IFRS 9 was issued in
November 2009 and October 2010 and substitutes the paragraphs in IAS 39 related to the classification and measurement of financial instruments. IFRS 9 required
classification of financial assets into two categories: measured at fair value and measured at amortized cost.
Classification is determined when the financial asset is initially recognized. Classification depends on the business model of the entity and the characteristics of the cash
flow arrangements of the financial instruments. For financial liabilities, the standard maintains most of the requirements under IAS 39.
The main change is when the fair value option is adopted for financial liabilities, in which case the portion of change in fair value that is attributable to changes in the
credit risk of the entity is registered in other comprehensive income and not in the statement of operations, except for cases in which this results in accounting
mismatches.
In July, 2014, the IFRS 9 issued a complete standard, in which includes the requisition previously issued and additional changes to introduce a new model of
impairment losses and changes (limited) for classification and measurement of financial assets. This change concludes the project of IASB in regards to financial
instruments and the date of adoption is applicable to periods beginning on January 1, 2018, with earlier adoption permitted (subject to local requirements). The
Company does not expect any impact related to the adoption of this review in its financial statements.
IAS 16 and IAS 41 "Property, Plant and Equipment and Agriculture", in July, 2014, the IASB issued a review of IAS 16 and IAS 41 - Property, Plant and Equipment
and Agriculture, to include the Biological Assets that meet the definition of Bearer plants (which are used solely to grow produce over several periods), this
amendment requires that Bearer plants are recorded as fixed assets in accordance with IAS 16, recording the historical cost rather than being measured at fair value,
as is required by IAS 41. Revised standard is effective for annual periods beginning on/after July 1, 2016. The Company does not expect any impact related to the
adoption of this review in its financial statements.
IFRS 10 and IAS 28 "Sale or contribution of assets between and investor and its associate or joint venture", on September, 2014, the IASB issued a revised IFRS
10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, these changes have as consequences the recognized
inconsistencies between the IFRS 10 demands and those ones to handle the sale of assets or the entry of the assets of an investor, associate or joint venture. The
main consequence of the amendments is that the gain or loss is recognized when a transaction involves a business (if it is installed in a subsidiary or not). A partial gain
or loss is recognized when a transaction involves assets that do not constitutes a business, even if these assets were allocated in a subsidiary. The amendments will be
effective for annual periods beginning on/after July 01, 2016. The Company does not expect any impact related to the adoption of this review in its financial statements.

There are not other rules, amendments and interpretations that are not in force in which the Company expects to have a relevant impact arising from its application on
its financial statements.

Business Combination
According to IFRS 3 (R)/CPC 15 R1 - Business Combination, business acquisitions are accounted for using the acquisition method at the acquisition date, which is the
date on which control is transferred to the Group . The consideration transferred in a business combination is measured at fair value, which is calculated by adding the
fair values of assets transferred, liabilities incurred on the acquisition date to the previous owners of the acquired shares issued in exchange for control of the acquired.
The acquisition-related costs are generally recognized in income when incurred.
Goodwill is measured as the excess of the sum of the consideration transferred, the recognized amount of noncontrolling interests in the acquired business plus the fair
value of the existing equity interest in the acquired less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed. If the
excess is negative, a bargain purchase gain is recognized immediately in income as a gain.

16

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
If the initial accounting for a business combination is incomplete at the closing of the period in which the business combination has occurred, the recording of the
temporary values of items whose accounting is incomplete are made. These temporary figures are adjusted during the measurement period (which shall not exceed one
year from the date of acquisition), or additional assets and liabilities are recognized to reflect new information relating to facts and circumstances existing at the
acquisition date which, if known, would have affected the amounts recognized on that date.
The Company includes in this note the acquisitions that: i) have been implemented in the period of three months ended on December 31,2014; ii) have changed the
amount paid or the fair value of the assets since the date of acquisition until the maturity of the business combination and; iii) the acquisition were concluded after one
year.Thus, the other acquisitions of the year that does not qualify under these conditions, are presented in the quarterly disclosures of that year.

In subsidiaries
4.1) Sul Valle's acquisition
In JBS Foods S.A., the indirect subsidiary Seara Alimentos Ltda. (Seara Alimentos) assumed the control of Sul Valle Alimentos Ltda. (Sul Valle) in March, 2014, by the
total amount of R$ 24,000. In addition, the purchase price may suffer adjustments due to certain working capital items to be verified by the Company. In the
consolidated, liabilities related to this transaction is kept under the caption Payables related to facilities acquisitions.
Seara Alimentos continues to evaluate the impacts of the operation and the allocation of the purchase price is preliminary, remained pending completion of the
assessments of the assets acquired and liabilities assumed, including deferred taxes. The allocation of the purchase price is subject to the following changes, which can
occur within a year, as defined in IFRS 3 (R)/CPC 15 R1. The amounts below reflect the estimated fair value of individual assets and liabilities assumed on March 31,
2014:
ASSETS

1,000

Cash and cash equivalents

1,496

Inventories
Biological assets

12,174

Recoverable taxes

21,839
139

Prepaid expenses and other assets

20,212

Property, plant and equipment, net

21

Intangible assets, net

56,881

TOTAL ASSETS

LIABILITIES AND EQUITY

9,000

Trade accounts payable

23,542

Loans and financings

3,229

Payroll, social charges and tax obligation

21,110

Equity

56,881

TOTAL LIABILITIES AND EQUITY

Estimated value of goodwill to expectation of future earnings:

Below, we present the goodwill to expectation of future earnings, which corresponds to the difference between the amount paid for controlling acquisition over the
acquired equity, calculated based on the identified assets and liabilities assumed in a business combination:
Total amount paid

24,000

Estimated fair value of net assets acquired

21,110

Estimated Goodwill to expectation of future earnings (note 13)

2,890

4.2) Novagro Granja Avcola Ltda.' acquisition

In JBS Foods S.A., JBS Aves acquired all the shares of Novagro on October, 2014 by the amount of R$ 38,000. In the consolidated, liabilities related to this transaction
is kept under the caption Payables related to facilities acquisitions, by the remaining amount of R$ 23,000.
JBS Aves continues to evaluate the impacts of the operation and the allocation of the purchase price is preliminary, remained pending completion of the assessments of
the assets acquired and liabilities assumed,including deferred taxes. The allocation of the purchase price is subject to the following changes, which can occur within a
year, as defined in IFRS 3 (R)/CPC 15 R1. The amounts below reflect the estimated fair value of individual assets and liabilities assumed on December 31, 2014:
ASSETS
Cash and cash equivalents

140

Trade accounts receivable

6,482
469

Inventories
Biological assets

8,516

Recoverable taxes

1,344
637

Other current and non current assets

11,458

Property, plant and equipment, net

29,046

TOTAL ASSETS

17

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
LIABILITIES AND EQUITY

2,938

Trade accounts payable

10,374

Loans and financings

742

Payroll, social charges and tax obligation and current and deferred income taxes

18

Other current and non current liabilities

14,974

Equity

29,046

TOTAL LIABILITIES AND EQUITY

Estimated value of goodwill to expectation of future earnings:

Below, we present the goodwill to expectation of future earnings, which corresponds to the difference between the amount paid for controlling acquisition over the
acquired equity, calculated based on the identified assets and liabilities assumed in a business combination:
Total amount paid

38,000

Fair value of the equity

14,974

Estimated Goodwill to expectation of future earnings (note 13)

23,026

4.3) Macedo Agroindustrial Ltda. (Operaes Tyson)'s acquisition

In JBS Foods S.A., JBS Aves acquired all the shares of Macedo Agroindustrial Ltda., previously called Tyson Foods do Brasil Ltda. on December, 2014 by the amount
of R$ 333,711 fully paid.
JBS Aves continues to evaluate the impacts of the operation and the allocation of the purchase price is preliminary, remained pending completion of the assessments of
the assets acquired and liabilities assumed, including deferred taxes. The allocation of the purchase price is subject to the following changes, which can occur within a
year, as defined in IFRS 3 (R)/CPC 15 R1. The amounts below reflect the estimated fair value of individual assets and liabilities assumed on December 31, 2014:
ASSETS
Cash and cash equivalents

14,729

Trade accounts receivable

117,993
86,357

Inventories

47,699

Biological assets
Recoverable taxes

124,948
16,253

Other current and non current assets

Property, plant and equipment, net

166,914
1,200

Intangible assets, net

TOTAL ASSETS

576,093

LIABILITIES AND EQUITY

52,199

Trade accounts payable

Loans and financings

116,126
11,485

Payroll, social charges and tax obligation and current and deferred income taxes

53,989

Other current and non current liabilities

Equity
TOTAL LIABILITIES AND EQUITY

342,294
576,093

Calculation of gain on bargain purchase:

Below, we present the gain on bargain which corresponds to the excess of the fair value of assets acquired and liabilities assumed over the aggregate purchase price,
calculated based on the identified assets and liabilities assumed in business combinations:
Total amount paid

332,711

Estimated fair value of net assets acquired

342,294

Gain on bargain

(9,583)

4.5) Andrews Meat' acquisition

In JBS USA, the indirect subsidiary JBS Australia, acquired 80% of controlling from Andrews Meat Industries, based in Sidney, by the approximate amount of US$ 33,8
millions (R$ 89,780 on December 31,2014). JBS Australia continues to evaluate the impacts of the operation and the allocation of the purchase price is preliminary,
remained pending completion of the assessments of the assets acquired and liabilities assumed.

18

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The allocation of the purchase price is subject to the following changes, which can occur within a year, as defined in IFRS 3 (R)/CPC 15 R1. The amounts below reflect
the estimated fair value of individual assets and liabilities assumed on December 31, 2014:
ASSETS
Trade accounts receivable

22,762

Inventories

30,197
1,532

Deferred taxes (assets)

154

Prepaid expenses and other assets

Property, plant and equipment, net

17,170

Intangible assets, net

15,910
87,726

TOTAL DO ATIVO
LIABILITIES AND EQUITY

6,857

Deferred taxes (liabilities)

Payroll, social charges and tax obligation and other liabilities

25,359

Noncontrolling

22,475

Equity

33,036
87,726

TOTAL LIABILITIES AND EQUITY

Estimated value of goodwill to expectation of future earnings:

Below, we present the goodwill to expectation of future earnings, which corresponds to the difference between the amount paid for controlling acquisition over the
acquired equity, calculated based on the identified assets and liabilities assumed in a business combination:

Total amount paid (converted the rate of R$ 2,6562 on December 31,2014)

Estimated fair value of net assets acquired

89,780

Estimated Goodwill to expectation of future earnings (note 13)

56,744

33,036

Cash and cash equivalents

Cash, bank accounts and short-term investments are the items of the balance sheets presented in the statements of the cash flows as cash and cash equivalents, as
described below:
Company

Cash and banks

CDB-DI (bank certificates of deposit)
Investment funds
National treasury bill - LFT

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

4,189,249
4,509,936
804,738

1,789,254
3,148,005
286,719

8,368,528
4,775,249
961,912
804,738

4,713,369
3,236,034
777,025
286,719

9,503,923

5,223,978

14,910,427

9,013,147

On December 31, 2014, as cash and banks line it is included part of the USD 500 millions amount, received on the last week of the year as dividends from the
subsidiary JBS USA.
CDB-DI (bank certificates of deposit) are held by financial institutions, with floating-rate and yield an average of 100% of the variation of the interbank deposit certificate
(Certificado de Depsito Interbancrio - CDI).
National treasury bill (LFT) Correspond to purchased bonds with financial institutions, whose conditions and characteristics are similar to the CDB's.
Investments funds - Consolidated
It is composed entirely of investments of the indirect subsidiary JBS Project Management GMBH (subsidiary of JBS Holding GMBH) in mutual investment funds
nonexclusive, whose investments are performed by JP Morgan as part of a cash management service.

Trade accounts receivable, net

Consolidated

Company
Current receivables
Overdue receivables:
From 1 to 30 days
From 31 to 60 days
From 61 to 90 days
Above 90 days
Allowance for doubtful accounts

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

3,265,933

3,981,264

8,305,274

7,866,991

229,464
14,696
20,906
60,198

111,388
9,527
2,990
70,489

1,085,777
127,764
59,952
191,148

840,843
109,287
80,982
232,266

(88,585)
236,679

(88,585)
105,809

(192,367)
1,272,274

(210,443)
1,052,935

9,577,548

8,919,926

3,502,612

4,087,073

19

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Pursuant to IFRS 7/CPC 39 - Financial Instruments, below are the changes in the allowance for doubtful accounts:
Company
December 31, 2014

Consolidated

December 31, 2013

December 31, 2014

Initial balance
Additions
Exchange variation
Write-offs

(88,585)
-

(96,933)
8,348

(210,443)
(2,674)
(1,289)
22,039

(131,688)
(97,729)
(3,901)
22,875

Final balance

(88,585)

(88,585)

(192,367)

(210,443)

Inventories
Company

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

1,582,328
311,547
390,944
132,789

1,796,484
169,326
314,429
133,909

5,426,529
754,389
1,047,788
1,044,404

4,713,790
507,475
830,847
852,504

2,417,608

2,414,148

8,273,110

6,904,616

Finished products
Work in process
Raw materials
Warehouse spare parts

December 31, 2013

Biological assets
The Company's biological assets are composed by live animals, which detail is as follows:
Consolidated
December 31, 2014

Current biological assets (consumable):

Chicken and eggs
Cattle
Hogs and lambs
Plants for harvest

Amount

December 31, 2013

Quantity
(in thousands)

Amount

Quantity
(in thousands)

1,059,805
53,989
454,072
-

453,046
25
2,528
-

923,778
61,371
430,645
3,549

415,306
39
2,414
-

1,567,866

455,599

1,419,343

417,759

Consolidated
December 31, 2014

Non-Current biological assets (bearer assets):

Chicken and eggs
Hogs

Changes in biological assets:

Current amount on December 31, 2013
Increase by reproduction (born) and costs absorptions
Increase by Purchase
Fair value (Mark to market)
Changes from current to noncurrent
Decrease by Death
Reduction for slaughter, sale or consumption
Exchange rate variation
Amortization
Effect acquired companies
Current amount on December 31, 2014

Amount

566,476
67,213

December 31, 2013

Quantity
(in thousands)

32,120
189

Amount

Quantity
(in thousands)

442,966
53,937

28,286
188

633,689

32,309

496,903

28,474

2,201,555

487,908

1,916,246

446,233

Current

Non-current

1,419,343
15,275,995
590,401
28,728
345,124
(12,469)
(16,233,175)
78,654
75,265

496,903
863,021
247,478
(345,124)
(2,339)
(113,868)
(10,084)
(599,724)
97,426

1,567,866

633,689

The current biological assets consist mainly of eggs awaiting hatching and animals, mostly of feedlots and maturity period for slaughtering, which remain in developmen
for a period of 30 to 48 days, for chicken, and 90 to 120 days, mainly cattle and 170 to 175 days, for hogs and lambs, until they reach maturity and therefore sent for
slaughter units. Due to this fact they are classified on current assets.
Noncurrent biological assets are composed of layer and breeder chicken and hogs that are intended for breeding. The lifetime of these animals for breeding is
approximately 68 weeks for chickens and 28 months for hogs, and for this reason, classified under non-current assets accounts.

20

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Below, details of the biological assets of the Company:
December 31, 2014

COMPANIES IN UNITED STATES OF AMERICA

Current biological assets (consumable):
Chicken and eggs
Cattle
Hogs and lambs

Amount

December 31, 2013

Quantity
(in thousands)

Amount

Quantity
(in thousands)

686,078
18,965
57,701

210,502
6
180

624,274
8,891
50,457

231,481
3
183

762,744

210,688

683,622

231,667

Chicken and eggs

342,366

17,539

297,503

17,660

Total biological assets valued at cost

342,366

17,539

297,503

17,660

Total biological assets valued at cost

Noncurrent biological assets (bearer assets):

Chicken and eggs PPC has breeding activity of broiler chickens for slaughtering (current) for production of fresh meat and / or industrialized products, and breeder
chicken (noncurrent) that are intended for breeding.
Cattle - A subsidiary JBS USA keeps cattle in feedlots between the period of 75-100 days. The active market for cattle in feedlot just over 180 days.
Hogs and lambs - JBS USA keeps hogs and lambs in the feedlot system.
Due to the fact there is no active market for these biological assets, the fair value of these biological assets is substantially represented by its acquisition cost plus
accumulated absorption, due to the short life cycle and by the fact that the profit margin is substantially representative only in the process of industrialization. Thereby,
the current assets are maintained at cost and the non-current assets besides being maintained at cost, are amortized according to the lifetime of the animals.

December 31, 2014

COMPANIES IN BRAZIL
Current biological assets (consumable):
Cattle
Biological assets valued at market:

Amount

35,024

December 31, 2013

Quantity
(in thousands)

Amount

19

Quantity
(in thousands)

52,480

36

35,024

19

52,480

36

Chicken and eggs

Hogs and lambs
Plants for harvest

373,727
396,371
-

242,544
2,348
-

299,504
380,188
3,549

183,825
2,231
-

Biological assets valued at cost:

770,098

244,892

683,241

186,056

Total current biological assets

805,122

244,911

735,721

186,092

Chicken and eggs

Hogs

224,110
67,213

14,581
189

145,463
53,937

10,626
188

Total noncurrent biological assets valued at cost

291,323

14,770

199,400

10,814

Noncurrent biological assets (bearer assets):

The operations relating to activities of cattle in Brazil are represented mainly by cattle in feedlots (intensive) and cattle in pastures (extensive), whose valuation at
market is reliably measured due to the existence of active markets.
The operations relating to chicken activities in Brazil, are divided among broiler chicken for slaughtering (current) for production "in natura" and/or industrialized
products, and layer and breeder chicken (noncurrent) that are intended for breeding. For both cases, the fair value of these biological assets is substantially
represented by its acquisition cost plus accumulated absorption, due to the short life cycle and by the fact that the profit margin is substantially representative only in the
process of industrialization. Thereby, the current assets are maintained at cost and the non-current assets besides being maintained at cost, are amortized according to
the lifetime of the animals.
Operations related to hogs of activities in Brazil, are similar to the activities of chicken, divided among hogs for slaughtering (current) for production "in natura" and/or
industrialized products, and layer and breeder hogs (non-current) that are intended for breeding. For both cases, the fair value of biological assets is substantially
represented by its acquisition cost plus accumulated absorption. Thereby, the current assets are maintained at cost and the noncurrent assets besides being
maintained at cost, are amortized according to the lifetime of the animals.
The balances plants for harvest, consist of corn, soybeans and grass, which will be used in the preparation of ration for cattle. The Management chose to keep the
measurement of biological assets at their cost values, due to the immateriality of the balances, since the efforts needed to develop and measure these assets at their
fair values overcome the benefits expected by Management.

21

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
9

Recoverable taxes
Company

Value-added tax on sales and services (ICMS / IVA / VAT / GST)

Excise tax - IPI
Social contribution on billings - PIS and COFINS
Withholding income tax - IRRF/IRPJ
Reintegra
Other
Current and Long-term:
Current
Noncurrent

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

944,751
44,037
817,737
225,360
40,814
16,969

919,691
43,937
720,362
164,310
105,917
3,968

1,791,298
110,688
1,552,775
265,826
49,648
76,427

1,460,744
109,792
975,294
425,600
124,753
56,798

2,089,668

1,958,185

3,846,662

3,152,981

1,310,521
779,147

1,275,614
682,571

2,300,624
1,546,038

2,003,256
1,149,725

2,089,668

1,958,185

3,846,662

3,152,981

Value-added tax on sales and services (ICMS / IVA / VAT/GST)

Recoverable ICMS refers to excess of credits derived from purchases of raw materials, packaging and other materials over tax charges due on domestic sales, since
exports are tax-exempted.
The Company expects to recover the total amount of the tax credit, including the ICMS credits from other states (difference between the statutory rate for tax
bookkeeping and the effective rate for ICMS collection in the state of origin).
Social contribution on billings - PIS and COFINS
Refers to non-cumulative PIS and COFINS credits arising from purchases of raw materials, packaging and other materials used in the products sold in the foreign
market.
Withholding income tax - IRRF/IRPJ
Refers mainly to withholding income tax levied on short-term investments, deductions and remaining foreing tax credits and prepayments of income tax and social
contribution paid by estimate, which can be offset against income tax payable on profits.
Reintegration of the Special Tax Values - Reintegra
The credit of Reintegra, according to the Law 12.546 from December 14, 2011, and later Provisory Measure n 651 from July 10, 2014, aims to restore partial or full
amounts related to tax costs of the production chain of exporting companies.
According to established in Ordinance n 428/2014, the amount of the credits is calculated by applying the percentage of 3% from gross revenue from the export of
certain industrial products, from October 1, 2014.
General comments
Company and JBS Embalagens recorded the monetary adjustment of their PIS, COFINS, IPI and IRPJ tax credits based on SELIC (Sistema Especial de Liquidao e
de Custdia - Special Settlement and Custody System), in the amount of R$ 203,599. As of this amount the Company received R$ 51,787 and the remaining balance is
R$ 151,812.
Annually, Company's management, supported by its tax and legal counsel, evaluates the segregation between current and noncurrent of tax credits according to their
attainment.

10

Related parties transactions

Refers to agreements between related parties recorded on the balance sheet of the Company as credits and debits with related parties, as follows:
COMPANY

Currency

Maturity

Management and borrowing costs

December 31, 2014

December 31, 2013

Direct subsidiaries
JBS Confinamento Ltda.(1)
JBS Embalagens Metlicas Ltda.
JBS USA, Inc (2)
Brazservice Wet Leather S.A.
JBS Global Meat S.A. (3)
JBS Foods S.A. (4)
Tannery do Brasil S.A.

R$
R$
US$
R$
R$
R$
R$

Jan 1, 2016
Jan 1, 2016
Mar 25, 2016
Jan 1, 2016
Mar 31, 2015
Apr 30, 2015

US$
R$
R$
US$
R$
R$
US$

Jan 1, 2016
Jan 1, 2016
Jan 23, 2015
Dec 31, 2014
Jan 1, 2016
Jan 1, 2016
-

Corresponds to CDI + 1% p.m.

Corresponds to CDI + 1% p.m.
Corresponds to Libor + 2.5% to 3% p.y.
Corresponds to CDI + 1% p.m.
Corresponds to CDI + 1% p.m.

61,153
91,459
(14,145)
17,942
1,837,576
28,442

81,349
75,309
(201,070)
87,862
-

Corresponds to 3% p.y.
Corresponds to CDI
Corresponds to CDI
Corresponds to Libor + 2% to 3% p.y.
Corresponds to CDI
-

(126,550)
1,264,574

26,082
679,386
107,768
6,117
622,946

Indirect subsidiaries
Zenda Leather S.A.
Seara Alimentos Ltda.
Beef Snacks Brasil Ind.Com. S.A.(3)
Beef Snacks International BV (3)
JBS Aves Ltda.
Seara Alimentos Ltda.
Zenda Leather S.A. (3)

3,160,451

(1)

- Disposal through capital increase in the subsidiary (according to note 11 - Investments in associate, subsidiaries and joint ventures).

(2)

- Disposal through dividends distribution (according to note 11 - Investments in associate, subsidiaries and joint ventures).

(3)

- Disposal through capitalization of the entire agreement balance (according to note 11 - Investments in associate, subsidiaries and joint ventures)

220,751
78,448
1,784,948

(4)

- Refers to remaining credits related to the selling of the equity participation and assets (according to note 11 - Investments in associate, subsidiaries and joint
ventures).

22

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Intercompany balances shown in the balance sheet of the Company and statement of operations are as follows:

COMPANY
Direct subsidiaries
JBS Confinamento Ltda.
JBS Leather Itlia SRL
Brazservice Wet Leather S.A.
Tannery do Brasil S.A.
Indirect subsidiaries
JBS Global (UK) Limited
JBS Argentina S.A.
Global Beef Trading SU Lda.
Austrlia Meat
JBS Toledo NV
JBS Aves Ltda.
Weddel Limited
Sampco Inc.
JBS Leather Europe
Meat Snacks Partners do Brasil Ltda.
Frigorfico Canelones S.A.
Rigamonti Salumificio Spa
Trump Asia Enterprise Ltd
JBS Paraguay
Zenda Leather S.A
Braslo Produtos de Carnes Ltda.
Excelsior Alimentos S.A.
Seara Alimentos Ltda.
MBL Alimentos S.A
JBS Chile Ltda.
Other related parties
S.A. Fabrica de Prod. Alimentcios Vigor
J&F Floresta Agropecuria Ltda.
Flora Produtos de Hig. Limp. S.A.
Flora Dist. Produtos de Hig. Limp. S.A.
Itamb Alimentos S.A.

December 31, 2014

Trade accounts
Trade accounts
receivable
payable

December 31, 2013

Trade accounts
Trade accounts
receivable
payable

197
15,034
2,713
363

44,892
33
8,084

355
3,466
-

44,778
-

59,907
31,893
22,494
1,472
58,269
9,280
513
31,229
2,622
9,581
2
10,490
-

73
1,809
108
40,624
2
23
278
8
1,355

52,470
2,798
15,990
1,524
2,118
33,904
4,255
9,989
6,197
-

48
1,804
109,790
113
20
701
1,415

14,889
860

2,713
2,894
7
2,265
23
-

69,429
-

3,743
1
4,791
24,159
909

345
94
9
32,344

4,057
181
5,453
11,932
1

18,547
1
58
13,884

289,662

145,830

162,592

260,588

23

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Impacts of related party transactions on Income Statements of the Company:
December 31, 2014
Financial
income
(expenses)
Direct subsidiaries
JBS Confinamento Ltda.
JBS Embalagens Metlicas Ltda.
JBS USA, Inc
JBS Slovakia Holdings s.r.o.
JBS Leather Itlia SRL
Novaprom Food Ingredients Ltda.
Brazservice Wet Leather S.A.
Tannery do Brasil S.A.
JBS Leather Paraguay
Indirect subsidiaries
JBS Global (UK) Limited
JBS Argentina S.A
Global Beef Trading SU Lda.
Beef Snacks Brasil Ind.Com. S.A.
Beef Snacks International
JBS Aves Ltda.
Australia Meat
JBS Toledo NV
JBS Leather Europe
Meat Snacks Partners do Brasil Ltda.
JBS Chile Ltda.
Agrovneto S.A. Indstria de Alimentos
Weddel Limited
Sampco Inc.
Frigorfico Canelones S.A.
Trump Asia Enterprise Ltd
JBS Paraguay
Zenda Leather S.A.
Braslo Produtos de Carnes Ltda.
Excelsior Alimentos S.A
Seara Alimentos Ltda.
JBS Leather Uruguay
MBL Alimentos S.A
Rigamonti Salumificio Spa
Other related parties
S.A. Fabrica de Prod. Alimentcios Vigor
J&F Floresta Agropecuria Ltda.
Flora Produtos de Hig. Limp. S.A.
Flora Dist. Produtos de Hig. Limp. S.A.
Itamb Alimentos S.A.

Purchases

December 31, 2013

Sales of products

Financial
income
(expenses)

Purchases

Sales of products

15,405
15,522
(7,868)
1,598
1,032
-

380,724
66,791
31,511
3,554

7,120
72,730
55,573
34,371
-

20,207
11,210
3,995
(758)
(18)
-

396,904
2,098
-

8,688
116,318
7,559
-

10,460
575
53,623
704
55,056
-

90
10,917
1,731
626,622
33,588
1,486
8,833
68,775
241
39
213,568
-

188,705
44,314
57,097
164,725
175,275
31,674
205,850
187,399
7,473
28,040
123,936
49
141,775
11,286
460
529

8,137
626
59,396
45
348
27,029
-

13,934
3,441
206,503
28,870
241
1,209
11,915
714
65,937
70,949
-

167,052
81,338
33,109
246,919
20,953
129,944
361
2,121
20,554
212,223
562
192,622
20,409
10,550
21
12,142
48,854
114
-

146,107

90,693
20,480
301
404
274,013
1,834,361

53,603
325
66,149
156,091
3,004
1,817,553

130,217

19,897
20,430
10,102
677
13,884
867,705

55,543
392
73,022
135,316
1
1,596,687

Guarantees provided and / or received

Notes 2016 - JBS S.A.: The indenture of these notes requires that any significant subsidiary (according to the definition on the indentures) of the Company to guarantee
the notes in an unsecured form, subject to certain exceptions. Currently the notes are guaranteed by JBS Hungary Holdings, Swift Beef Company, JBS USA Holdings
and JBS USA LLC.
Notes 2016 - Bertin (JBS S.A. is the successor through merger): The indenture of these notes requires that any material subsidiary (according to the definition on the
indenture) of the Company to guarantee the notes in an unsecured form, subject to certain exceptions. Currently the notes are guaranteed by JBS Hungary Holdings.
Notes 2018, Notes 2020, Notes 2023 and Notes 2024 - JBS S.A.: these registered notes on the Company are guaranteed, in an unsecured form, by the Company and
JBS Hungary Holdings.
Notes 2020, Notes 2021 and Notes 2024 - JBS USA, LLC: these notes are guaranteed, in an unsecured form, by the Company, JBS Hungary Holding, JBS USA
Holdings and by other restricted American subsidiaries of JBS USA, LLC (according to the definition on the indenture).
Details of transactions with related parties
The main assets and liabilities balances, as well as the transactions that had impact on income statements of the year related with related parties transactions, which
Management considers that were accomplished in the usual market conditions for similar types of operations of trade accounts receivable and trade accounts payable
and for related parties operations of only pass the borrowing costs, in addition to the operational expenses that support these contracts.
Among the transactions between related parties more representative, we emphasize the purchase of cattle for slaughter between the Company and it subsidiary JBS
Confinamento, related party J&F Floresta Agropecuria Ltda. Such transactions are made at regular price and market conditions in their region because it takes the
market prices applied with other suppliers (third parties not JBS Group). The number of cattle supplied by these related parties is irrelevant comparing to the demanded
volume by the Company.
On the related parties contracts are calculated management and borrowing costs, exchange rate and interests, when applicable.
No allowance for doubtful accounts or bad debts expenses relating to related-party transactions were recorded for the years ended on December 31, 2014 and
December 31, 2013.

24

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Consolidated - Credits with related parties
The consolidated amount of credits with related parties, of R$ 370,072 in December 31, 2014 (R$ 733,958 in December 31, 2013) arises from the use of the credit of up
to US$ 450 million between the indirect subsidiary JBS Five Rivers (subsidiary of JBS USA) and J&F Oklahoma (subsidiary of J&F Participaes S.A., which is not
consolidated in the Company).
This transaction has interest and J&F Oklahoma uses this credit to purchase cattle for fattening, which are allocated in the JBS Five Rivers feedyards for fattening until
ready for slaughter.
J&F Oklahoma is still part in 2 commercial agreements with subsidiaries of the Company:
i) Cattle supply and feeding agreement with JBS Five Rivers, where it takes the responsibility for the cattle from J&F Oklahoma and collects the medicinal and adding
value costs, besides a daily fee of rent in line with market terms;
ii) Sales and purchase cattle agreement with JBS USA of at least 800,000 animals/year, starting from 2009 up to 2019.
JBS Five Rivers also guarantee in third degree, after guarantee of the assets from J&F Oklahoma and its parent company, up to US$ 250 million in a line of credit of
J&F Oklahoma.
In June 2011, J&F Australia entered into a purchase and sale of cattle to JBS Australia, according to this agreement, J&F Australia should sell for JBS Australia and
this one should buy at least 200,000 head of cattle from J&F Australia per year.
In January 2013, J&F Canada entered into a purchase and sale of cattle to JBS Canada, according to this agreement, J&F Canada should sell for JBS Canada and this
one should buy at least 50,000 head of cattle from J&F Canada per year.
Remuneration of key management
Company's management includes the Executive Board and the Board of Directors. The aggregate amount of compensation received by the members of Companys
management for the services provided in their respective areas of business in the years ended on December 31, 2014 and 2013 is the following:

December 31, 2014

Members

Executive Board and Board of Directors

December 31, 2013

Value

Members

Value

13

7,487

13

7,426

13

7,487

13

7,426

The alternate members of the Board of Directors are paid for each meeting of Council in attendance.
The Institutional Relations Executive Officer, Administrative and Control Director and Investor Relations Director are part of the employment contract regime CLT
(which is the Consolidation of Labor Laws), which follows all the legal prerogatives of payments and benefits. Not included any remuneration bonuses of the Company
or other corporate benefits to additional employees or that should be extended to their family.
In accordance with IAS 24(R)/CPC 05 R1 - Related parties, except for those described above, the other members of the Executive Board, and Management Board are
not part of any employment contract or any other contracts for additional business benefits such as post-employment benefits or other long-term benefits, termination of
work that does not conform to those requested by the CLT , where applicable, or payment based on shares.

11

Investments in associate, subsidiaries and joint ventures

Company
Investments in subsidiaries, associates and joint ventures
Goodwill (note 13)

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

9,462,958
698,119
10,161,077

9,457,375
2,136,978
11,594,353

295,350
295,350

277,571
277,571

25

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Relevant information about investments in the in the period of December 31, 2014:
Participation

Total assets

Capital stock

Equity

Net revenue

Net income (loss)

Controlled:
JBS Embalagens Metlicas Ltda.
JBS Global Investments S.A.
JBS Holding Internacional S.A.
JBS USA, Inc.
JBS Confinamento Ltda.
JBS Slovakia Holdings, s.r.o.
JBS Leather Italia S.R.L.
JBS S/A (DMCC Branch)
JBS Leather Paraguay
JBS Holding GMBH
JBS Global Luxembourg S..r.l.
FG Holding III Ltda.
JBS Global Meat S.A
Columbus Netherlands B.V.
Brazservice Wet Leather S.A.

99.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
97.50%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%

88,957
23,236
596,173
24,939,588
626,400
44,732
249,734
338
3,239
4,904,064
405,827
66
266,263
441,401
49,548

2
211,168
1,505,844
2,719,088
599,401
7,345
37,698
3,074
22
513,390
239,247
53
244,848
276,200
23,063

JBS Foods S.A.

100.00%

14,104,219

98.83%

45,101

21.12%
50.00%

Tannery do Brasil S.A.

Associates:
Vigor Alimentos S.A.
Joint venture:
Meat Snack Partners LLC

(8,997)
23,236
467,095
4,240,732
516,279
36,649
33,129
313
(299)
1,443,790
196,790
66
244,848
187,349
(2,862)

986,734
79,206,777
112,000
195,503
8,731
2,125,125
989,798
515,139
54,862

(12,747)
2,766
(25,114)
2,843,937
(14,826)
(1,705)
4,496
(419)
(283)
196,448
(37,224)
(2)
(21,342)
(914)

841,035

1,768,296

10,110,264

836,748

29,843

9,142

38,721

3,624,683

1,191,378

1,268,814

1,889,668

56,909

35,912

54,651

(10,506)
66,112

3,024

In consolidated financial statements, goodwill is recorded in the Intangible assets due to expected profitability of the acquired subsidiary, assets and liabilities are
consolidated with the Individual Statement. In the balance sheets of the Company, this goodwill is recorded on Investments, the same group of noncurrent assets,
because, for the Company it is part of its investment on subsidiary acquisition, not being its intangible assets (as stated above, the expectation of future earnings - the
genuine intangible - is the subsidiary). In the company the intangible goodwill arising from the merger of Bertin and Novaprom, and the rest allocated to investments.
Consolidated all goodwill re recorded as intangible.
In the Company:
Equity in subsidiaries
December 31,
2013

JBS Embalagens Metlicas Ltda.

JBS Global Investments S.A.
JBS Holding Internacional S.A. (1)
JBS Aves Ltda. (2)
(3)
JBS USA, Inc.
(4)
JBS Confinamento Ltda.
JBS Slovakia Holdings, s.r.o.
JBS Leather Italia S.R.L
JBS S/A (DMCC Branch)
JBS Leather Paraguay
JBS Holding GMBH (5)
(6)
JBS Global Luxembourg S..r.l.
FG Holding III Ltda.
JBS Global Meat S.A (7)
Vigor Alimentos S.A.
Columbus Netherlands B.V. (8)
Seara Holding Europe B.V. (2)
Baumhardt Com. Particip. Ltda.
JBS Foods Particip. Ltda. (2)
Brazservice Wet Leather S.A.
JBS Foods S.A. (2)
Tannery do Brasil S.A.
Meat Snack Partners LLC
Subtotal
Accrual for loss
Total
(*)

Addition
(disposal)

3,713
2,513
433,319
62,819
4,590,739
465,105
36,630
28,477
33
11
1,212,493
70,893
68
135,001
257,376
110,523
652,530
31,030
1,364,102
-

(9)

15,974
99,525
(110,878)
(3,319,447)
66,000
650
3,568
125,897
109,847
(3,316)
82,714
(636,555)
(34,388)
(1,421,759)
(1,948)
841,034

19,421

9,457,375

28,683
(4,134,978)

Exchange rate
variation (i)

1,983
363,197
3
156
49
(27)
7,173
1,566
18,206
(22,273)
-

Equity in
subsidiaries (ii)

Income Statements

(40,635)
(237,694)
1,721
24,108
35,658
(2,752)
224
(425)
(13,278)
90,514

(12,620)
2,766
(25,114)
48,059
2,843,937
(14,826)
(1,705)
4,496
(419)
(276)
196,448
(37,224)
(2)
13,966
(21,342)
6,074
3,783
70,935
(914)
836,748

(13)

(10,372)

1,815

(4,685)

1,511

371,848

(147,257)

3,903,909

December 31, 2014

(8,907)
23,236
467,095
4,240,732
516,279
36,649
33,129
313
(292)
1,443,790
196,790
66
244,848
268,026
187,349
(2,862)
1,768,296
9,036
27,324
9,450,897

12,061

9,457,375

9,462,958

Transfer of the negative investments for other non-current liabilities (Brazservice, JBS Embalagens and Leather Paraguay).

26

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
In the Consolidated:

December 31, 2013

Vigor Alimentos S.A.(10)

Meat Snack Partners, LLC
Total

(10)

Addition
(disposal)

Equity in subsidiaries
Equity in
subsidiaries (ii)
Income Statements

December 31, 2014

257,376

(3,316)

13,966

20,195

(3,000)

(2,008)

12,137

27,324

277,571

(6,316)

(2,008)

26,103

295,350

268,026

(i) - As defined in IAS 21/CPC 2 R1 - The effects of changes in foreign exchanges rates, refers to the exchange rate variation of foreign currency investments that are
accounted under the equity method, which was accounted directly to equity of the Company on the line "Accumulated translation adjustments".
(ii) - Refers to the reflex of valuation adjustments and exchange rate variation of foreign investments and capital transactions, accounted in valuation adjustments to
equity in the subsidiaries, whose effect is being recognized when calculating the equity in subsidiaries, directly to equity of the Company.
Below is presented the breakdown of main additions and disposals of investments during the year:
(1)

- JBS Holding Internacional S.A. On December,2014 the Company made a capital contribution through the entire loan balance capitalization.

(2)

- On March 31, 2014 a corporate restructuring was initiated through sale, by book value, of the company JBS Foods Ltda. and capitalization of the Company's
investments in the subsidiaries JBS Aves and Seara Holding to JBS Foods S.A., created to receive these operations. The total amount of the sale of investment in JBS
Foods Ltda. was in the amount of R$ 1,421,759 plus goodwill in the amount of R$ 1,376,660 summarizing the total amount of R$ 2,798,419 and the capitalization of the
investments in JBS Aves and Seara Holding in the total amount of R$ 841,034. In addition, on August, 2014 the Company sold all the shares of the holding Baumhardt,
as well as its direct investments in the subsidiary Excelsior by the amount of R$ 47,224, being the amount arising from the transfer of investments of R$ 34,388 and
goodwill in the amount of R$ 12,836.

(3)

- JBS USA, Inc. At the year ended on December 31,2014, JBS USA remitted in cash the amount of US$ 1,264,375 and US$ 230,000 as a debt forgiveness,
equivalent to dividends and capital reduction.

(4)

- JBS Confinamento Ltda. On December,2014 the Company made a capital increase through the partial loan capitalization.

(5)

- JBS Holding GMBH The Company made a capital increase through capitalization of commercial receivables.

(6)

- JBS Global Luxembourg S..r.l. On the year ended on December 31st of 2014, the Company made a cash capital increase for working capital purposes and also a
capitalization of Beef Snacks International BV and Beef Snacks Brasil Ind. Com. S.A. loans.

(7)

- JBS Global Meat S.A On December,2014 the Company made a capital contribution through the entire loan balance capitalization.

(8)

- Columbus Netherlands B.V. - On September, 2014 the Company made a capital contribution through the entire loan balance capitalization.

(9)

- Meat Snack Partners LLC (MSP) - In October 2014, as a matter of corporate simplification the Company transferred the MSP joint controlled investment to become
a direct joint controlled investment between the Company and Jack Link.
(10)
- Vigor Alimentos S.A. e Meat Snack Partners, LLC Basically relating the dividends distribution, recorded in the Company under the caption of other current
assets.

Subsequent events:
On January 14, 2015, the Council of Economic Defense (CADE) approved the acquisition of AMSE02 participaes, company of Big Frango Group, by JBS Aves,
subsidiary of JBS Foods. Such approval is published at Official Gazette of the Federal Executive (Dirio Oficial da Unio) without restrictions. The final objective of the
operation is the acquisition of the total shares of AMSE02 in the companies Big Frango Indstria and Comrcio de Alimentos Ltda., Nutribig Administrao and
Participaes Sociais S.A. and Agrcola Jandelle S.A. (Big Frango Group and "Operation", respectively).
On February 5, 2015, the Australian Competition and Consumer Commission (ACCC) announced the approval of the acquisition of Australian Consolidated Food
Holdings Pty. Ltd. (Primo) through JBS Smallgoods HoldCo Australia Pty. Ltd. (wholly subsidiary of the Company, through the subsidiary JBS USA). The Foreign
Investment Review Board (FIRB) continues to evaluate the operation. The consideration for the proposed acquisition is approximately AU$ 1.450 millions. The
proposed acquisition is not conditional upon any external funding approval.
On February 27, 2015, JBS Foods requested, the cancellation of the registration for the initial public offering of primary distribution the issued common shares and the
registration of the securities issuer, based on the current market conjuncture. Management will keep its shareholders and the market informed when a favorable
situation is identified.

12

Property, plant and equipment, net

Net amount
Company
Buildings
Land
Machinery and equipment
Facilities
Computer equipment
Vehicles
Construction in progress
Other

Cost

Revaluation

Accumulated
depreciation

December 31, 2014

December 31, 2013

3,192,895
1,139,386
5,000,084
1,381,955
201,993
617,844
1,347,217
230,491

116,620
9,305
44,140
21,731
682
51
1,234

(563,921)
(1,514,400)
(314,847)
(118,335)
(164,957)
(38,738)

2,745,594
1,148,691
3,529,824
1,088,839
84,340
452,938
1,347,217
192,987

2,757,435
988,544
3,424,150
826,721
96,871
293,104
828,605
176,906

13,111,865

193,763

(2,715,198)

10,590,430

9,392,336

27

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Net amount
Accumulated
depreciation

Consolidated

Cost

Buildings
Land
Machinery and equipment

9,756,278
2,963,874
13,982,956
1,990,337
428,614
934,070
2,457,998
1,160,974

116,620
9,305
44,140
21,731
682
51
1,234

33,675,101

193,763

Facilities
Computer equipment
Vehicles
Construction in progress
Other

Revaluation

December 31, 2014

December 31, 2013

(2,118,947)
(6,007,860)
(549,434)
(230,325)
(407,477)
(456,124)

7,753,951
2,973,179
8,019,236
1,462,634
198,971
526,644
2,457,998
706,084

7,369,250
2,399,488
7,337,010
1,195,665
200,588
352,418
1,430,774
655,423

(9,770,167)

24,098,697

20,940,616

The Company annually accompanies the useful lives of fixed assets and no significant differences were indentified during the year. The weighted average depreciation
rates of assets that make up each group are as follows:
Average annual depreciation rates as of December 31,
2014
2013
Company

Consolidated

3.03%
0.00%
6.23%
4.64%
11.41%
9.38%
2.41%

Buildings
Land
Machinery and equipment
Facilities
Computer equipment
Vehicles
Other

Company

3.54%
0.00%
8.12%
4.98%
17.54%
9.00%
7.21%

Consolidated

2.88%
0.00%
6.20%
5.14%
12.07%
10.88%
2.89%

4.12%
0.00%
8.39%
4.92%
15.53%
10.34%
4.46%

Changes in property, plant and equipment

December 31, 2013

Company
Buildings
Land
Machinery and equipment
Facilities
Computer equipment
Vehicles
Construction in progress (1)
Other

(1)

Additions net of
transferences

Disposals

Depreciation

(172)

December 31, 2014

2,757,435

88,469

988,544

160,147

(100,138)

3,424,150
826,721

430,224
327,630

(10,184)
(358)

(314,366)
(65,154)

3,529,824
1,088,839

96,871
293,104

10,824
253,918

(235)
(36,112)

(23,120)
(57,972)

84,340
452,938

828,605
176,906

518,612
21,818

(162)

(5,575)

1,347,217
192,987

9,392,336

1,811,642

(47,223)

(566,325)

10,590,430

2,745,594

1,148,691

- Additions of construction in progress are presented for financial statements purposes, net of transfers, being composed in December 31, 2014 as follow:

( + ) Additions in the period: R$ 823,094;

( - ) Transfer to a proper property plant item: (R$ 304,482);
( = ) Additions net of transfers: R$ 518,612.

Consolidated

Decem ber 31,

2013

Acquisitions

(2)

Additions net of
transferences (3)

Disposals

Adjustm ents IFRS

3/CPC 15

Depreciation

Exchange
rate variation

December 31,
2014

(349.085)

300.489

7.753.951

75.793

2.973.179

(1.138.937)

269.062

8.019.236

Buildings

7.369.250

88.357

347.981

(20.444)

17.403

Land

2.399.488

35.507

469.350

(6.959)

Machinery and equipment

7.337.010

106.452

1.504.587

(62.588)

3.650

Facilities

1.195.665

17.963

357.851

(10.066)

(25)

(100.126)

1.372

1.462.634

Computer equipment

200.588

2.044

67.568

(608)

(731)

(75.311)

5.421

198.971

Vehicles

352.418

1.738

305.383

(52.020)

(84.086)

3.208

526.644

1.430.774

7.175

944.561

75.488

2.457.998

Construction in progress
Other

655.423

15.385

90.474

(5.043)

20.940.616

274.621

4.087.755

(157.728)

3
(21)
20.279

(83.852)

33.718

706.084

(1.831.397)

764.551

24.098.697

IFRS 3/CPC 15 adjustments

According to the standard IFRS 3 (R)/CPC 15 (R1) - Business Combination, JBS Foods S.A. performed the accounting valuation at fair value of the business
combination of the companies of the Seara's Group and Massa Leve. To proceed with the evaluation of the fair value, a specialized company was hired to issue the
technical evaluation report.
(2)

- The acquisitions of R$ 274,621 refers to Sul Valle, Massa Leve, Frinal, Avebom, Eleven, Tyson and Novagro in the consolidated of JBS Foods S.A.

28

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
(3)

- The additions of R$ 4,087,755 are composed by various acquisitions and pulverized construction in progress, including the amount of R$ 337,542 in the Company
referring to a beef processing facility implementation recently acquired, awaiting physical inventory by a specialized company, including Kaiowa, R$ 215,062 in the
subsidiary JBS Foods S.A. related to the acquisition of the plant in Carambe and R$ 131,262 related to the ending of the business combination of the Global Meat and
Midtown's acquisition.
The balance of construction in progress refers to investments for expansion, modernization and adaptation of plants for the maintenance, increasing productivity and
obtaining new certifications required by the market. When these assets are concluded and start operating, they will be transferred to a proper property, plant and
equipment account and then will be subject to depreciation.
Part of the increase in construction in progress in the Company as reflected in the consolidated, is result of recent acquisitions of assets by the Company. The assets
are recorded as construction in progress and subsequently transferred to their balance account referred to, see note 20.
Until December 2007, revaluations were performed on property, plant and equipment items of several Companys plants, and offsetting entries were made to the
revaluation reserve account and the provision for deferred income and social contribution taxes. The method and assumption applied to estimate the fair value of the
assets were determined based on current market prices. As of December 31, 2014, the total amount of property, plant and equipment revaluation is R$ 193,763, which
the revaluation reserve is R$ 87,877 and the provision for deferred income and social contribution taxes is R$ 40,697. For revalued property, plant and equipment, the
Company recorded accumulated depreciation of R$ 65,189.
The Company and its subsidiaries reviewed the useful lives of their property, plant and equipment, by hiring a specialized company. Significant differences were not
found in comparison with the useful lives adopted as of December 31, 2009. From January 1, 2010 new acquisitions are made with estimated useful lives, annually the
useful
lives are reviewed and when applicable adjusted.
,
Interest capitalization - Borrowing costs
Pursuant to IAS 23/CPC 20 R1 Borrowing costs, the Company capitalized those borrowing costs directly and indirectly attributable to the construction of qualifying
assets, which are exclusively represented by construction in progress. The borrowing costs allocated to the qualifying assets as of December 31, 2014 and 2013 are
shown below:
Consolidated
Company
Construction in progress
(+) capitalized borrowing costs

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

1,283,834
63,383

788,961
39,644

2,323,934
134,064

1,345,960
84,814

1,347,217

828,605

2,457,998

1,430,774

In the year ended on December 31, 2014, the amount of capitalized interest on construction in progress including the amount of the additions is R$ 38,229. in the
Company.
Impairment test of assets
In compliance with the requirements of IAS 36/CPC 01 R1 - Impairment of assets, the Company performed the annual impairment test of the tangible and intangible
assets on December 31, 2014, which were estimated based on the values in use of its various cash-generating units using the discounted cash flows, and showed that
the estimated market value is higher than the net book value at the valuation date and, during the year there was no evidence of loss of value of individual assets or
group of relevant assets. Potential impacts of loss recover them are highlighted in the notes, where relevant. The assumptions of the annual test of recovery are
described in note 13.

13

Intangible assets, net

Consolidated

Company

Goodwill (incorporations and subsidiaries)

Trademarks

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

9,085,970

9,085,970

12,985,834

12,702,971

452,578

452,578

1,179,287

1,553,916

11,716

8,489

52,780

34,672

90,346

74,844

Software
Water rights
Client portfolio

1,122,591

603,152

Other

5,674

6,108

9,550,264

9,547,037

15,436,512

14,975,663

The amortization, when applicable, is recognized linearly based on the estimated useful lives. The estimated useful life and the amortization method are reviewed at
each year end and the effect of any changes in the estimates are recorded prospectively. The average amortization rates of assets comprising each group are as
follows:
Average annual amortization rates as of December 31,
2014
Trademarks
Software
Water rights
Client portfolio
Other

2013

Company

Consolidated

Company

Consolidated

20%
-

9%
23%
9%
13%
23%

20%
-

9%
26%
9%
12%
24%

29

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Changes in intangible assets
Company

December 31, 2013

Goodwill
Trademarks
Software

Consolidated

Decem ber 31,

2013

Goodwill
Trademarks

Acquisitions

12.702.971

(1)

December 31, 2014

(973)

(4,189)

9,085,970
452,578
11,716

9,547,037

8,389

(973)

(4,189)

9,550,264

406.920

Disposal (3)

(194.966)

210

18.514

Software

34.672

2.591

34.190

Water rights

74.844

6.216

603.152

8.675

Other

Amortization

8,389

1.553.916

Client portfolio

Disposal

9,085,970
452,578
8,489

Additions (2)

Additions

(974)

6.108

1.136

70

(1.146)

14.975.663

3.937

474.585

(197.086)

Adjustm ents IFRS

3/CPC 15

Am ortization

(46.249)
(420.806)

(4.407)

Exchange
rate variation

Decem ber 31,

2014

117.158

12.985.834

31.860

1.179.287

(16.546)

(104)

9.390

90.346

(93.658)

68.730

1.122.591

(941)

447

5.674

(115.656)

226.432

15.436.512

535.692
68.637

(1.153)

52.780

IFRS 3/CPC 15 adjustments

According to the standard IFRS 3 (R)/CPC 15 (R1) - Business Combination, JBS Foods S.A. performed the accounting valuation at fair value of the business
combination of the companies of the Seara's Group and Massa Leve. To proceed with the evaluation of the fair value, a specialized company was hired to issue the
technical evaluation report.
(1)

- The acquisitions in the amount of R$ 3,937 refers to Sul Valle, Massa Leve, Frinal, Avebom, Eleven, Tyson and Novagro in the consolidated of JBS Foods S.A.

(2)

- The additions in goodwill for the year refers to the goodwill arising by the indirect subsidiary Seara Alimentos by the Sul Valle's acquisition in the amount of R$ 2,890
and Massa Leve's acquisition in the amount of R$ 196,922; and by the indirect subsidiary JBS Aves by the Frinal's acquisition in the amount of R$ 52,795 and
Avebom's acquisition in the amount of R$ 71,669 and Eleven's acquisition in the amount of R$ 2,874 and Novagro's acquisition in the amount of R$ 23,026; and by the
JBS USA subsidiary by the acquisition of participation on Andrews Meat in the amount of R$ 56,744.
(3)

- The disposal in the intangible asset in the line of Goodwill is reflected as a fixed asset addition and refers to the finalization of the business combination of the
Global Meat and Midtown's acquisition, where the preliminary goodwill was allocated in a final way as a fair value on the fixed asset, being recorded as tangible asset,
according to note 12.
Amortization expenses are recorded in the accounts of "Cost of goods sold" and "General and administrative expenses".
Goodwill: According to technical interpretation ICPC 09 - Individual financial statements, Separate Statements, Consolidated Statements and Application of Equity
Method, in the consolidated goodwill is recorded in the Intangible assets due to expected profitability of the acquired subsidiary, assets and liabilities are consolidated
with the Individual Statement. In the balance sheets of the Company, this goodwill is recorded on Investments, the same group of noncurrent assets, because, for the
Company it is part of its investment on subsidiary acquisition, not being its intangible assets (as stated above, the expectation of future earnings - the genuine intangible
- is the subsidiary).
In the company the intangible goodwill arising from the merger of Bertin and Novaprom, and the rest allocated to investments. Consolidated all goodwill are recorded as
intangible.
Goodwill
Company- Recorded as intangible (Goodwill)
In December 2009 the Company merged Bertin. The market value of this operation was ascertained based on an appraisal report prepared by a valuation company.
The fair value of share exchange between the companies amounted to R$ 11,987,963, generating goodwill based on future profitability of R$ 9,069,926. Pursuant to
IFRS 3 (R)/CPC 15 R1 Business combinations, represents the residual amount in determining the fair value of net assets acquired. In Business Combination was
allocated an amount of R$ 414,111 for the intangible and property, plant and equipment accounts.
The Company incorporated all the shares of Novaprom, which owned a goodwill based on expected future earnings of R$ 16,044. Upon such incorporation, the
Company goodwill is transferred from investment line and is allocated as an intangible item.
Company- Recorded as investment (Goodwill in subsidiaries)
In July 2007 the Company acquired a 100% interest in Swift Foods Company, currently known as JBS USA , with goodwill of R$ 906,481, based on expected future
earnings, which was being amortized over 5 years. Accumulated amortization until December 31, 2008 was R$ 248,654, showing a net carrying amount of R$ 657,827
as of December 31, 2014.
In September 2013, the Company acquired the company Columbus, holding of Zenda's Group, with a goodwill in the amount of 40,292, based on the expectation of
future earnings.
Consolidated- Recorded as intangible (Goodwill)
JBS USA has goodwill of US$ 240,250 thousand, equivalent to R$ 638,152 as of December 31, 2014, arising mainly from the acquisition in 2008 of Smithfield beef,
Tasman and Five Rivers and in 2014 of Andrews Meat.
In 2007, JBS Holding Internacional S.A., through its subsidiaries JBS Argentina S.A. and JBS Mendoza S.A., acquired 100% of the capital stock of Consignaciones
Rurales S.A. and Argenvases S.A.I.C. and, in 2008, through the same subsidiaries, acquired 100% of the capital stock of Colcar S.A., with total goodwill of $ 14,110
thousand Argentinean pesos, equivalent to R$ 4,476 as of December 31, 2014. Goodwill is based upon expected future earnings of the acquired businesses.
JBS Global Luxembourg has goodwill of EUR 5,188 thousands, equivalent to R$ 16,742 as December 31, 2014, arising from the acquisition of the Toledo Group ,
based on the appreciation of the assets.

30

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The subsidiary JBS Foods S.A. possesses other goodwill arising from the acquisition of companies, and based on expectation of future earnings in the amount of R$
1,102,534, as follows:
i) Parc Castell by acquisition of Valores Catalanes S.A. in the amount of R$ 539,657
ii) Seara Alimentos by acquisition of the subsidiary Massa Leve - R$ 196,922
iii) Seara Alimentos, successor by merger of Frigorfico Mabella Ltda. - R$ 123,124
iv) JBS Aves by acquisition of the subsidiary Avebom - R$ 71,669
v) JBS Aves by acquisition of the subsidiary Frinal S.A. - R$ 52,795
vi) JBS Aves by acquisition of the subsidiary Agrovneto - R$ 33,618
vii) Masfrangos Part. Ltda. by acquisition of Agrofrango - R$ 28,351
viii) JBS Aves by acquisition of the subsidiary Novagro - R$ 23,026
ix) Babicora Holding Part. Ltda. by acquisition of Seara Alimentos - R$ 11,111
x) Mas do Brasil Part Ltda. by acquisition of Penasul Ltda. - R$ 9,974
xi) Seara Alimentos by acquisition of the subsidiary Sul Valle - R$ 2,890
xii) Brusand LTD by acquisition of the subsidiary Penasul UK - R$ 6,476
xiii) JBS Aves by acquisition of the subsidiary Eleven - R$ 2,874
xiv) JBS Aves by acquisition of the subsidiary Agil - R$ 47
JBS Foods S.A. has a goodwill in the amount of R$ 1,309,382 referring to the acquisition of JBS Foods Ltda. and R$ 12,835 referring to the acquisition of Excelsior
Alimentos Ltda., both of them based on the expectation of future earnings.
The others Company's subsidiaries have another goodwill arising from the acquisition of companies, based on expected future earnings of R$ 117,624, for the following
investments:
i) JBS Handels GmbH by acquisition of the subsidiary Holding Inc. - R$ 26,981
ii) Itaholb International B.V. by acquisition of the subsidiary Rigamonti - R$ 74,660
iii) Capital Joy Holding Limited - R$ 7,018
iv) Trump Asia Enterprises Ltd by acquisition of the subsidiary Wonder Best - R$ 2,614
v) JBS Paraguay S.A. by acquisition of the subsidiary IFPSA - R$ 6,351
In accordance with CVM decision No. 565, dated December 17, 2008, and CVM Decision No. 553, dated November 12, 2008, since January 1, 2009 the Company has
adopted the criteria of not amortize goodwill based upon expected future earnings, which is in line with IFRS 3 (R) /CPC 15 R1 - Business combination. Under these
CVM decisions and the IFRS, intangible assets with indefinite life can no longer be amortized.
Goodwill and intangible assets with no estimated useful lives are tested for impairment at least once a year, in accordance with IFRS 3 (R)CPC 15 R1 Business
combinations.
Impairment test of goodwill
The Company tested the recovery of the goodwill using the concept of "value in use" through models of discounted cash flow, representing the group of tangible and
intangible assets used in the development and sale of products to its customers.
The process of determining the value in use involves the use of assumptions, judgments and estimates about cash flows, such as rates of revenue growth, costs and
expenses, estimates of investment, future working capital and discount rates. The assumptions about growth projections, cash flow and future cash flows are based on
Management's estimates, as well as comparable information from market, economic conditions that will exist during the economic life of the group of assets that
provides the generation of the cash flows. The future cash flows were discounted based on the weighted average rate of the cost of capital (WACC).
Consistent with the techniques of economic evaluation, assessment of the value in use is effected for a period of 10 years, and after, considering the perpetuity of the
premises in view of the indefinite business continuity capability. The Management judged appropriate to use the period of 10 years based on their past experience in
designing accurately projected cash flows. This understanding is in accordance with paragraph 35 of IAS 36/CPC 01 R1 - Impairment of Assets.
The growth rates used to extrapolate the projections after the period of 10 years ranged from 3% to 4% at year in nominal values. The estimated future cash flows were
discounted using discount rates ranging from 8.9% to 10.3% at year, also in nominal values. The principal assumptions used in estimating the value in use are as
follows:
Sales Revenue - Revenues are projected from 2015 to 2024 considering the growth in volume and the price of different products of Cash Generating Units.
Operating costs and expenses - The costs and expenses were projected accordance with historical performance of the Company and, with the historical growth in
revenues. In addition, we considered efficiency gains derived from process improvements.
Capital investment - Investment in capital goods were estimated considering the maintenance of existing infrastructure and expectations required to enable the supply
of products.
Key assumptions were based on historical performance of the Company and reasonable macroeconomic assumptions reasoned basis on projections of the financial
market, documented and approved by management.
Based on the annual test for impairment of the Company's intangible assets, prepared with the projections made on the quarterly financial statements of December 31,
2014, growth prospects and results of operations for the year ended on December 31, 2014, there were no indications of possible losses or losses, as the estimated
value in use is higher than the carrying amount at the valuation date.

14

Trade accounts payable

Company
Commodities - cattle
Materials and services
Finished products

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

971,093
510,910
85,399

770,546
541,944
58,715

2,903,724
3,755,967
283,242

1,902,201
3,096,015
344,172

1,567,402

1,371,205

6,942,933

5,342,388

31

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
15

Loans and financings

The Company discloses below the operations in foreign and local currency, considering the functional currency of each subsidiary. Local currency indicates loans
denominated in the functional currency of the borrower.
Current liabilities
Company
Annual rate of interest and commissions

December 31, 2014

December 31, 2013

Exchange variation + interest from 1.98% to 3.50%

Exchange variation, Libor and interest from 1% to 7%

5,843,516

3,008,575

Prepayment

577,838

1,300,677

144-A
Credit note - export

Exchange variation + interest from 6.25% to 10.50%

Exchange variation + interest of 7.85% or 118% CDI

243,038
166,640
6,831,032

199,341
12,025
4,520,618

94,973
-

77,967
1,222
124

960,027

862,188

2,771
1,418,330
4,053
9,270
1,733
245,286

354
1,112,611
50
4,075
3,148
1,726
255,039

2,736,443

2,318,504

9,567,475

6,839,122

Type
Foreign currency
ACC - (advances on exchange contracts)

Local currency
FINAME
BNDES automatic - TJLP
BNDES automatic - Currency basket
Working capital- Brazilian Reais

TJLP and interest from 1% to 8.5%

TJLP and interest from 3.1% to 5.44%
Currency basket BNDES + interest from 2% to 3.1%
Interest of 4% + 100% of CDI or 100% to 120% of CDI

Working capital - EUROS

Credit note - export
FCO - Middle West Fund
FNO - North Fund
CDC - Direct Credit to Consumers
FINEP
Debentures

Euribor +interest from 0.15% to 1.75%

Interest from 1.2% to 8.54% or 100% to 118.5% of CDI
Interest of 10.00%
Interest of 10.00%
TJLP and interest from 2.11% to 6.82%
Interest of 4.0% to 4.5%
127.6% of CDI and IPCA + 9%

Noncurrent liabilities
Company
Type

Annual rate of interest and commissions

December 31, 2014

December 31, 2013

Exchange variation, Libor and interest from 1% to 7%

Exchange variation + interest from 6.25% to 10.50%
Exchange variation + interest of 7.85% or 118% CDI

358,971
10,075,940
54,777
10,489,688

1,412,126
7,738,003
193,238
9,343,367

Foreign currency
Prepayment
144-A
Credit note - export
Local currency
FINAME
Working capital- Brazilian Reais
Working capital - EUROS
Credit note - export
FNO - North Fund
CDC - Direct Credit to Consumers
FINEP
Debentures

Breakdown:
Current liabilities
Noncurrent liabilities
Maturities of noncurrent liabilities are as follows:
2015
2016
2017
2018
2019
2020
2021
Maturities thereafter 2021

TJLP and interest from 1% to 8.5%

Interest of 4% + 100% of CDI or 100% to 120% of CDI
Euribor +interest from 0.15% to 1.75%
Interest from 1.2% to 8.54% or 100% to 118.5% of CDI
Interest of 10.00%
TJLP and interest from 2.11% to 6.82%
TJLP and interest of 4% to 4.5%
127.6% of CDI and IPCA + 9%

265,731

225,639

1,080,440
35,421
1,730,805
8,678
2,628
75,693
3,199,396

1,940,536
43,765
1,962,434
12,660
4,066
7,127
214,255
4,410,482

13,689,084

13,753,849

9,567,475
13,689,084
23,256,559

6,839,122
13,753,849
20,592,971

3,276,569
981,247
2,605,336
53,299
2,667,061
14,513
4,091,059
13,689,084

2,514,791
3,947,468
698,546
2,326,206
5,498
2,373,563
2,471
1,885,306
13,753,849

32

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Current liabilities
Consolidated
Type
Foreign currency
ACC - (advances on exchange contracts)
Prepayment
144-A
Credit note - import
Credit note - export
Canadian Credit Facility
Canadian Credit Facility - term loan
Canadian Bank Facility
Credit note - LCAL
Andrews Meat Secured Facility

Annual rate of interest and commissions

December 31, 2014

December 31, 2013

Exchange variation + interest from 1.98% to 3.50%

Exchange variation, Libor and interest from 1% to 7%
Exchange variation + interest from 6.25% to 10.50%
Exchange variation + interest of 11.25%
Exchange variation + interest of 7.85% or 118% CDI
CDOR or RBC Prime or Libor + applicable interest
Interest of 3.65%
Interest of 3.5%
Interest of 3.9%
BBSY + 0.8%

6,456,114

3,069,450

2,032,200
243,038
17,029
166,640
141
2,149
2,869
32
12,941

1,418,119
199,341
23,424
12,025
351
1,994
14,822
-

8,933,153

4,739,526

109,856
29,101
507
10,189
13,831
63,064
17,225
59,820
449
5,533
1,050,457
286,365
162,874
3,096
1,742,824
1,636
4,053
244,127
5,719
9,270
203,829
4,407
442,225
14,787
245,286
23,275
17
4,753,822

78,796
4,416
1,222
124
169
21,273
13,707
55,993
15,733
3,844
972,220
131
4,734
42
866,662
252,987
137,829
7,297
1,120,735
1,803
4,075
202,308
5,719
3,148
160,325
47
486,993
13,055
255,039
940
4,691,366

13,686,975

9,430,892

Local Currency
FINAME
JBS Mortgage
BNDES automatic - TJLP
BNDES automatic - Currency basket
US revolver
JBS Term Loan due to 2018
Five Rivers term loan
Senior notes due 2020
Senior notes due 2021
Senior notes due 2024
PPC - US Senior note 2018
PPC - US credit facility - term loans
PPC - US bonds
Plainwell Bond
Marshaltown
Working capital- Brazilian Reais
Working capital - US dollars
Working capital - EUROS
Working capital - Argentine Pesos
Credit note - export
FCO - Middle West Fund
FNO - North Fund
Credit note - import
Finep - Financing of Studies and Projects
CDC - Direct Credit to Consumers
Rural - Credit note
ACC - (advances on exchange contracts)
Rural - Credit note
Term loan due to 2020
Debentures
CCB - BNDES
Others

TJLP and interest from 1% to 8.5%

Interest from 5.8% to 8.4%
TJLP and interest from 3.1% to 5.44%
Currency basket + interest from 2% to 3.1%
Libor or Prime + applicable rate
Alternate Base Rate ("ABR")+1.75% or Libor +2.75%
Libor + 2.75% or Prime + 1.5%
Interest of 8.25%
Interest of 7.25%
Interest of 5.875%
Interest of 7.875%
Interest from 2.4% to 9.0%
Interest from 7.625% to 9.25%
Interest of 4.39%
Interest of 2.34%
Interest of 4% + 100% of CDI or 100% to 120% of CDI
Libor +interest from 1.10% to 3.20%
Euribor +interest from 0.15% to 1.75%
Interest of 18.77%
Interest from 1.2% to 8.54% or 100% to 118.5% of CDI
Interest of 10.00%
Interest of 10.00%
Interest of 4.44% (LIBOR and interest of 2.80%)
Interest of 4.0% to 4.5%
TJLP and interest from 2.11% to 6.82%
Interest of 5.5%
Interest de 1%
Interest of 5,5%
Alternate Base Rate ("ABR")+1.75% or Libor +2.75%
127.6% of CDI and IPCA + 9%
Interest of 5.98% + UMBNDES until 8.7%

33

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Noncurrent liabilities
Consolidated
Annual rate of interest and commissions

December 31, 2014

December 31, 2013

Prepayment
144-A
Credit note - export
ACC - (advances on exchange contracts)
Canadian Credit Facility
Canadian Credit Facility - term loan
Credit note - LCAL

Exchange variation, Libor and interest from 1% to 7%

Exchange variation + interest from 6.25% to 10.50%
Exchange variation + interest of 7.85% or 118% CDI
Exchange variation + interest from 1.98% to 3.50%
CDOR or RBC Prime or Libor + applicable interest
Exchange variation + interest of 3.65%
Interest of 3.9%

2,180,904
10,075,940
54,777
174,207
33,558
9,456
12,528,842

2,553,208
7,738,003
193,238
23,436
142,554
34,134
10,684,573

Local currency
FINAME
JBS Mortgage
US revolver
JBS Term Loan due 2018
Five Rivers term loan
Senior note due 2020
Senior note due 2021
Senior notes due 2024
PPC - US Senior note due 2018
PPC - US bonds
Plainwell Bond
Marshaltown
Working capital- Brazilian Reais
Working capital - US dollars
Working capital - Euro
Working capital - Argentine Pesos
Credit Note - export
FCO - Middle West Fund
FNO - North Fund
Finep - Financing of Studies and Projects
CDC - Direct Credit to Consumers
Term loan due 2020
Rural - Credit
Debentures
CCB - BNDES
Others

TJLP and interest from 1% to 8.5%

Interest from 5.8% to 8.4%
Libor or Prime + applicable rate
Alternate Base Rate ("ABR")+1.75% or Libor +2.75%
Libor + 2.75% or Prime + 1.5%
Interest of 8.25%
Interest of 7.25%
Interest of 5.875%
Interest of 7.875%
Interest from 7.625% to 9.25%
Interest of 4.39%
Interest of 2.34%
Interest of 4% + 100% of CDI or 100% to 120% of CDI
Libor +interest from 1.10% to 3.20%
Euribor + interest from 0.15% to 1.75%
Interest of 18.77%
Interest from 1.2% to 8.54% or 100% to 118.5% of CDI
Interest of 10.00%
Interest of 10.00%
Interest of 4% to 4.5%
TJLP and interest from 2.11% to 6.82%
Alternate Base Rate ("ABR")+1.75% or Libor +2.75%
Interest of 5.5%
127.6% of CDI and IPCA + 9%
Interest of 5.98% + UMBNDES until 8.7%

288,529
6,338
335,024
1,075,086
250,697
1,826,493
3,001,673
1,975,066
9,342
21,834
25,675
1,083,081
29,883
35,421
2,689
2,464,580
4,645
8,678
92,154
2,628
1,285,994
4,008
33,805
13,863,323

227,570
31,257
1,063,330
154,874
1,605,161
2,584,448
1,116,598
8,511
23,878
22,545
1,958,748
47,197
45,475
2,405,592
6,238
12,660
27,539
4,066
1,080,901
214,255
5,033
12,645,876

26,392,165

23,330,449

13,686,975
26,392,165
40,079,140

9,430,892
23,330,449
32,761,341

4,625,423
1,770,675
4,773,027
337,812
5,747,090
3,038,449
6,099,689
26,392,165

3,000,141
4,557,716
1,083,776
5,029,761
32,617
5,073,542
2,651,133
1,901,763
23,330,449

Type
Foreign currency

Breakdown:
Current liabilities
Noncurrent liabilities

Maturities of noncurrent liabilities are as follows:

2015
2016
2017
2018
2019
2020
2021
Maturities thereafter 2021

ACC (advances on exchange contracts) are credit facilities obtained from financial institutions by the Company, its subsidiary JBS Argentina and JBS Foods S.A.
subsidiaries, in the amount of US$ 2,432,242 on December 31, 2014 (US$ 1,320,299 on December 31, 2013), to finance export transactions.
CDC (Working Capital Financing contract) credit facilities obtained from financial institutions by the Company, to finance the truck fleet of the transport operation.
144-A Refers to six issuances under the rules of 144-A notes and Reg S: (i) Notes 2016 - JBS S.A. in the amount of US$ 300 million with an interest rate of 10.50%
per annum; (ii) Notes 2016 of Bertin (an enterprise of which the Company is the successor through merger) in the amount of US$ 350 million with an interest rate of
10.25% per annum, (iii) Notes 2018 - JBS S.A. in the amount of US$ 900 million with an interest rate of 8.25% per annum, (iv) Note 2020 - JBS S.A., in the amount of
US$ 1 billion with an interest rate of 7.75% per annum, (v) Notes 2023 - JBS S.A. in the amount of US$ 775 million with an interest rate of 6.25% per annum and (v)
Notes 2024 - JBS S.A. in the amount of US$ 750 million with an interest rate of 7.25% per annum.
In June and July, 2014 there was a partial repurchase of the Notes 2016, in the amount of US$ 116,387 (R$ 256,342) of the principal and Bertin's Notes 2016, in the
amount of US$ 147,716 (R$ 325,344) of principal, made by JBS USA on behalf of JBS S.A. The Company, also incurred in payments of US$ 40,901 (R$ 108,641) for
early settlement of such Notes, such amount is recorded on interest liabilities.
FINAME / FINEM Financing agreements with BNDES are secured by the assets subject matter of the financing.

34

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Rural credit note Refers to the capture the subsidiary Seara Alimentos Ltda. (Group Seara) with resources of Banco Itau, Banco do Brasil, Santander, Bradesco and
Caixa for the purpose of fostering the supply chain (rural). Payment will be made within one year, with interest rate of 5.50% per year.
Senior Secured Credit Facility On June 30, 2011 the subsidiary JBS USA, LLC entered into a credit agreement consisting of a term loan commitment of US$ 850
million, with a payment term of 5 years and LIBOR or Prime plus applicable margins.
Term Loan due to 2018 - On May 27, 2011 the subsidiary JBS USA, LLC entered into a credit agreement consisting of a term loan of US$ 475 million with a payment
term of 7 years and ABL + 1.75% or LIBOR + 2.75% per year.
Term Loan A due to 2016 - On June 14, 2011 the indirect subsidiary JBS Five Rivers obtained an US$ 85 million term loan with a payment term of 5 years and LIBOR
+ 2.75% or Prime + 1.5% per year.
Term Loan due to 2020 - On September 18, 2013 the subsidiary JBS USA, LLC made the raising of US$ 500 million with a term of seven years and cost of: (i) ABR
plus 1.75% or (ii) LIBOR + 2.75% per year.
Notes 8,25% due to 2020 - In January 30, 2012, the subsidiaries JBS USA, LLC and JBS USA Finance, issued the Notes 8,25% due to 2020, with the principal amount
of US$ 700 millions with a payment term of 8 years and cost of 8,25% per year.
Notes 7,25% due to 2021- In May 27, 2011, the subsidiaries JBS USA and JBS USA Finance issued the Notes 7,25% due to 2021, with the principal amount of US$
650 millions with a payment term of 10 years and cost of 7,25% per year.
Notes 5.875% due to 2024 In June 25, 2014, the subsidiary JBS USA, LLC and JBS USA Finance issued the Notes 5.875% maturing in 2024, at the principal
amount of US$ 750 million with a payment term of 10 years and cost of 5.875% per year.
Rural credit note - Refers to financing obtained by the subsidiary JBS Aves from Caixa Econmica Federal, with the purpose of promoting the supply chain (rural). The
payment will be made within one year and it will have J&F Participaes S.A. as guarantor.
Subsequent events: As announced to the Market on March 05, 2015, the subsidiary Pilgrim's Pride Corporation (American publicly held company controlled by JBS
USA Holdings), issued in the same day the Notes 2025 in the amount of US$ 500 million with interest rate of 5.75% in the same terms as the other notes under rule 144A.

16

Credit operations, guarantees and covenants

On December 31, 2014, the Company was in compliance with all covenants. The main credit operations, guarantees and covenants of the Company and its
subsidiaries are described below.
Notes 2016 - JBS S.A. - On August 4, 2006, the Company issued Notes 2016 maturing in 2016, in the principal amount of US$300 million. The interest rate applicable
to the notes is 10.50% per annum and interest is paid semiannually on February 4 and August 4, beginning on February 4, 2007. The principal amount of the notes
should be fully paid by August 4, 2016. Pursuant to the additional indenture dated January 31, 2007, JBS Finance Ltd became a co-issuer of Notes 2016.
On July 10, 2014 the Company concluded the tender in connection with its previously announced cash tender offers and related consent solicitations for any or all of the
outstanding Notes 2016. As a result of the tender, the Company purchased approximately US$116.4 million in aggregate principal amount of the Notes 2016,
representing approximately 38.8% of the then outstanding Notes 2016. The Company has not obtained the requisite consents for the execution of a supplemental
indenture to amend the indenture governing the Notes 2016. Accordingly, a supplemental indenture to the indenture governing the Notes 2016 was not executed.
Guarantees: The indenture governing Notes 2016 requires that any significant subsidiary (as defined in the indenture governing the Notes 2016) guarantee all
obligations of the Company as stated in Notes 2016, subject to certain exceptions. Notes 2016 are guaranteed by JBS Hungary Holdings Kft (indirect wholly owned
subsidiary of the Company), by JBS USA Holdings, JBS USA, LLC and Swift Beef Company. Other subsidiaries of the Company may be required to guarantee the
Notes 2016 in the future.
Covenants: The indenture for the Notes 2016 contains customary negative covenants that limit the Company's ability and the ability of certain subsidiaries to, among
other things:
. incur additional debt, if the ratio net debt/EBITDA is higher than a determined ratio;
. incur liens;
. sell or dispose of assets;
. pay certain dividends and make other payments;
. permit restrictions on dividends and other restricted payments by its restricted subsidiaries;
. have certain transactions with related parties;
. consolidate or enter into merger or transfer all assets to another company;
. execute lease transactions with repurchase option (sale/leaseback); and
. change the control without making a purchase offer on Notes 2016.
As mentioned above, the terms and conditions for Notes 2016 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any debts
(subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is incurred is
lower than 4.75/1.0.
Again, as mentioned above, Notes 2016 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
Additionally, according to Notes 2016, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the notes 2016; (ii) the
Company can incur in at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed 50% of the accrued net income in a certain year or when in a determined year where there is loss, the
payment value does not exceed US$30 million.

35

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Events of default: The indenture of Notes 2016 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events related
to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is entitled to
declare immediately payable the principal and accrued interest on the notes.
Bertin's Notes 2016 - Bertin S.A., an enterprise of which the Company is the successor through merger, issued Bertin's Notes 2016 at the principal amount of US$350
million on October 13, 2006 (under its former corporate name of Bertin Ltda.). The interest applicable to Bertin's Notes 2016 corresponds to 10.25% per annum, paid
semiannually on April 5 and October 5, beginning on April 5, 2007. The principal amount of the notes will be fully paid by October 5, 2016.
On December 14, 2009, Bertin successfully concluded a consent solicitation relating to the 2016 Bertin Notes. The consent solicitation (1) amended certain provisions
in the indenture governing the Bertin's Notes 2016 to conform the provisions to the indenture governing Notes 2016 and (2) amended the change of control provisions
to exclude the Bertin merger as an event that would trigger a change of control under the Bertin's 2016 Notes. The supplemental indenture implementing these
amendments to the Bertin's Notes 2016 was executed on December 22, 2009.
On July 10, 2014 the Company announced the tender results in connection with its previously announced cash tender offers and related consent solicitations for any or
all of the outstanding Bertin's Notes 2016. As a result of the tender, the Company purchased approximately US$147.7 million in aggregate principal amount of the
Bertin's Notes 2016, representing approximately 42.2% of the then outstanding Notes 2016. The Company has not obtained the requisite consents for the execution of
a supplemental indenture to amend the indenture governing the Bertin's Notes 2016. Accordingly, a supplemental indenture to the indenture governing the Bertin's
Notes 2016 was not executed.
Guarantees: The indenture that governs Bertin's Notes 2016 requires that any "material subsidiary" (as defined in the indenture governing Bertin's Notes 2016) to
guarantee all obligations of the Company established in Bertin's Notes 2016. They are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of
the Company). Other subsidiaries of the Company may be required to guarantee the Bertin's Notes 2016 in the future.
Covenants: The indenture of Bertin's Notes 2016 contains customary negative covenants that limit the Company's ability and the ability of its subsidiaries to, among
other things:
. incur additional debt if the net debt/EBITDA ratio is higher than a determined ratio;
. incur liens;
. pay dividends or make certain payments to shareholders;
. sell or dispose of assets;
. have certain transactions with related parties;
. dissolve, consolidate, merge or acquire the business or assets of other entities;
. execute lease transactions with repurchase option (sale/leaseback);
. change the companys control without making a purchase offer on Bertins Notes 2016; and
. in a general manner, limits dividends or other payments to shareholders by restricted subsidiaries.
As indicated above, the terms and conditions for Bertins Notes 2016 include covenants that restrict the Company (as legal successor of Bertin) and the subsidiaries, to
incur any debts (subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt
is incurred is lower than 4.75/1.0.
Besides, Bertins Notes 2016 restrict the Company and its subsidiaries from: (i) paying dividends or making any other payments of securities; (ii) paying debts or other
obligations; (iii) making loans or advances; or (iv) transferring its properties or assets. Despite that, such payments can be made in certain cases, such as, (a) when
there are certain obligations incurred before the issuance of the notes; (b) they are established in law; (c) when the transfer of assets takes place in the normal course
of the business, or under clauses usually accepted in joint venture agreements executed by the subsidiaries; (d) when imposed by standard documents of BNDES or
other international governmental agencies.
Additionally, according to the notes, the Company can only, directly or indirectly, declare or pay any dividends or make any distributions related to securities issued by
the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) it is not in default in relation to the notes; (ii) the Company can incur in at
least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph above; and (iii) the total
value to be paid does not exceed 50% of the accrued net income in a certain year or when in a determined year where there is loss, the payment value does not
exceed US$ 30 million.
Events of default: The issuance instrument of Bertin's Notes 2016 contains customary events of default. They include non-compliance with or violation of terms,
restrictions and other agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment
within the grace periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and
certain events related to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding
at the time is entitled to declare immediately payable the principal and accrued interest on the notes.
Notes 2018 - JBS S.A. - On July 29, 2010, JBS Finance II Ltd., a wholly-owned subsidiary of the Company, issued Notes 2018 maturing in 2018, at the principal
amount of US$700 million and on September 10, 2010, the company issued additional notes at the principal amount of US$200 million under the indenture of Notes
2018. The interest rate applicable to the notes is 8.25% per annum and are semiannually paid on January 29 and July 29 of each year, beginning January 29, 2011.
The principal amount of the Notes 2018 should be fully paid by January 29, 2018.
The Notes 2018 are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of the Company) and by JBS S.A.
Covenants: The indenture of Notes 2018 contains customary negative covenants that limit the Company's ability and the ability of certain subsidiaries to, among other
things:
. incur additional debt if the net debt/EBITDA ratio is higher than a determined ratio;
. incur liens;
. pay dividends or make certain payments to shareholders;
. permit restrictions on dividends and other restricted payments by restricted subsidiaries
. sell or dispose of assets;
. have certain transactions with related parties;
. execute lease transactions with repurchase option (sale/leaseback); and
. change the companys control without making a purchase offer on Notes 2018.

36

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
As mentioned above, the terms and conditions for Notes 2018 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any debts
(subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is incurred is
lower than 4.75/1.0.
Also, as mentioned above, the Notes 2018 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
Additionally, according to Notes 2018, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the Notes 2018; (ii) the
Company can incur at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed (a) 50% of the amount of the net income accrued on a cumulative basis during the period, taken as one
accounting period, beginning on the first day of the fiscal quarter in which the issue date of the Notes 2018 occurs and ending on the last day of JBS' most recently
completed fiscal quarter for which financial statements are publicly available, or if the aggregate net income is a loss, minus 100% of the amount of the loss, plus (b)
100% of the net cash proceeds received by JBS from the issue or sale of its equity interests or other capital contributions subsequent to the issue date of the Notes
2018, plus (c) 100% of the fair market value of property other than cash received by JBS from the issue or sale of its equity interests or other capital contributions
subsequent to the issue date of the Notes 2018.
Events of default: The indenture of Notes 2018 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events related
to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is entitled to
declare immediately payable the principal and accrued interest on the notes.
Notes 2020 - On October 28, 2013, JBS Investments GmbH, a wholly-owned subsidiary of the Company, issued Notes 2020 maturing in 2020, at the principal amount
of US$1 billion. The interest rate applicable to the notes is 7.75% per annum and are semiannually paid on April 28 and October 28 of each year, beginning April 28,
2014. The principal amount of the Notes 2020 should be fully paid by October 28, 2020.
The Notes 2020 are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of the Company) and by JBS S.A.
Covenants: The indenture of Notes 2020 contains customary negative covenants that limit the Company's ability and the ability of certain subsidiaries to, among other
things:
. incur additional debt if the net debt/EBITDA ratio is higher than a determined ratio;
. incur liens;
. pay dividends or make certain payments to shareholders;
. permit restrictions on dividends and other restricted payments by restricted subsidiaries
. sell or dispose of assets;
. have certain transactions with related parties;
. execute lease transactions with repurchase option (sale/leaseback); and
. change the companys control without making a purchase offer on Notes 2020.
As mentioned above, the terms and conditions for Notes 2020 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any debts
(subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is incurred is
lower than 4.75/1.0.
Also, as mentioned above, the Notes 2020 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
Additionally, according to Notes 2020, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the Notes 2020; (ii) the
Company can incur at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed (a) 50% of the amount of the net income accrued on a cumulative basis during the period, taken as one
accounting period, beginning on January 1, 2013 and ending on the last day of JBS' most recently completed fiscal quarter for which financial statements are publicly
available, or if the aggregate net income is a loss, minus 100% of the amount of the loss, plus (b) 100% of the net cash proceeds received by JBS from the issue or
sale of its equity interests or other capital contributions subsequent to the issue date of the Notes 2020, plus (c) 100% of the fair market value of property other than
cash received by JBS from the issue or sale of its equity interests or other capital contributions subsequent to the issue date of the Notes 2020.
Events of default: The indenture of Notes 2020 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events related
to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is entitled to
declare immediately payable the principal and accrued interest on the notes.
Notes 2023 - On February 5, 2013, JBS Investments GmbH, a wholly-owned subsidiary of the Company, issued Notes 2023 maturing in 2023, at the principal amount
of US$500 million and on April 11, 2013, the company issued additional notes at the principal amount of US$275 million under the indenture of Notes 2023. The interest
rate applicable to the notes is 6.25% per annum and are semiannually paid on February 5 and August 5 of each year, beginning August 5, 2013. The principal amount
of the Notes 2023 should be fully paid by February 5, 2023.
The Notes 2023 are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of the Company) and by JBS S.A.
Covenants: The indenture of Notes 2023 contains customary negative covenants that limit the Company's ability and the ability of certain subsidiaries to, among other
things:

37

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
. incur additional debt if the net debt/EBITDA ratio is higher than a determined ratio;
. incur liens;
. pay dividends or make certain payments to shareholders;
. permit restrictions on dividends and other restricted payments by restricted subsidiaries
. sell or dispose of assets;
. have certain transactions with related parties;
. execute lease transactions with repurchase option (sale/leaseback); and
. change the companys control without making a purchase offer on Notes 2023.
As mentioned above, the terms and conditions for Notes 2023 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any debts
(subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is incurred is
lower than 4.75/1.0.
Also, as mentioned above, the Notes 2023 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
Additionally, according to Notes 2023, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the Notes 2023; (ii) the
Company can incur at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed (a) 50% of the amount of the net income accrued on a cumulative basis during the period, taken as one
accounting period, beginning on the first day of the fiscal quarter in which the issue date of the Notes 2023 occurs and ending on the last day of JBS' most recently
completed fiscal quarter for which financial statements are publicly available, or if the aggregate net income is a loss, minus 100% of the amount of the loss, plus (b)
100% of the net cash proceeds received by JBS from the issue or sale of its equity interests or other capital contributions subsequent to the issue date of the Notes
2023, plus (c) 100% of the fair market value of property other than cash received by JBS from the issue or sale of its equity interests or other capital contributions
subsequent to the issue date of the Notes 2023.
Events of default: The indenture of Notes 2023 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events related
to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is entitled to
declare immediately payable the principal and accrued interest on the notes.
Notes 2024 - On April 3, 2014, JBS Investments GmbH, a wholly-owned subsidiary of the Company, issued Notes 2024 maturing in 2024, at the principal amount of
US$750 million. The interest rate applicable to the notes is 7.25% per annum and are semiannually paid on April 3 and October 3 of each year, beginning October 3,
2014. The principal amount of the Notes 2024 should be fully paid by April 3, 2024.
The Notes 2024 are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of the Company) and by JBS S.A.
Covenants: The indenture of Notes 2024 contains customary negative covenants that limit the Company's ability and the ability of certain subsidiaries to, among other
things:
. incur additional debt if the net debt/EBITDA ratio is higher than a determined ratio;
. incur liens;
. pay dividends or make certain payments to shareholders;
. permit restrictions on dividends and other restricted payments by restricted subsidiaries
. sell or dispose of assets;
. have certain transactions with related parties;
. execute lease transactions with repurchase option (sale/leaseback); and
. change the companys control without making a purchase offer on Notes 2024.
As mentioned above, the terms and conditions for Notes 2024 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any debts
(subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is incurred is
lower than 4.75/1.0.
Also, as mentioned above, the Notes 2024 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
Additionally, according to Notes 2024, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the Notes 2024; (ii) the
Company can incur at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed (a) 50% of the amount of the net income accrued on a cumulative basis during the period, taken as one
accounting period, beginning January 1, 2013 and ending on the last day of JBS' most recently completed fiscal quarter for which financial statements are publicly
available, or if the aggregate net income is a loss, minus 100% of the amount of the loss, plus (b) 100% of the net cash proceeds received by JBS from the issue or
sale of its equity interests or other capital contributions subsequent to the issue date of the Notes 2024, plus (c) 100% of the fair market value of property other than
cash received by JBS from the issue or sale of its equity interests or other capital contributions subsequent to the issue date of the Notes 2024.
Events of default: The indenture of Notes 2024 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events related
to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is entitled to
declare immediately payable the principal and accrued interest on the notes.

38

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Description of Indebtedness of JBS USA
Senior Secured Credit Facility - On November 5, 2008, JBS USA entered into a senior secured revolving credit facility (the Credit Agreement) that allowed
borrowings up to US$400.0 million. Up to US$75.0 million of the Credit Agreement was available for the issuance of letters of credit.
On June 30, 2011, JBS USA and JBS Australia executed the Revolving Syndicated Facility Agreement ("Revolving Facility") to amend and restate the Credit
Agreement. The facility provides a maximum borrowing availability of US$850.0 million available in three tranches of US$625.0 million, US$150.0 million and US$75.0
million. The facility includes a swingline sub-facility of US$80.0 million for the Company. The facility matures on June 30, 2016. Up to $250.0 million of the Revolving
Facility is available for the issuance of letters of credit. On January 26, 2012, JBS USA and JBS Australia executed the first amendment to the Revolving Facility
primarily to include a US$35.0 million swingline sub-facility for JBS Australia which allows JBS Australia to obtain same day funding.
On August 15, 2014, JBS USA and JBS Australia executed the Senior Secured Revolving Credit Facility (the Amended and Restated Revolving Facility) to amend
and restate the Revolving Facility to increase the maximum borrowing availability to US$900.0 million available in three tranches of US$675.0 million, US$150.0 million
and US$75.0 million. The facility includes swingline sub-facilities of US$75.0 million for JBS USA Holdings and US$35.0 million for JBS Australia. The facility matures
on August 15, 2019. Loans bear interest at applicable LIBOR or the prime rate plus applicable margins that are based on utilization of the facility.
Availability: Availability under the Amended and Restated Revolving Facility is subject to a borrowing base. The borrowing base is based on certain JBS USA whollyowned subsidiaries assets as described below, with the exclusion of JBS Five Rivers. The borrowing base consists of percentages of eligible accounts receivable,
inventory and supplies less certain eligibility and availability reserves. As of December 31, 2014, there were US$97.5 million of outstanding letters of credit and
borrowing availability of US$664.5 million.
Security and Guarantees: Borrowings made by JBS USA under the Amended and Restated Revolving Facility are guaranteed by JBS S.A., JBS Hungary Holdings
Kft., JBS USA Holdings and all domestic subsidiaries of JBS USA except JBS Five Rivers and certain other immaterial subsidiaries. In addition, all material subsidiaries
of JBS Australia guarantee JBS Australia borrowings. Furthermore, the borrowings are collateralized by a first priority perfected lien and interest in accounts receivable,
finished goods and supply inventories.
Covenants: The Amended and Restated Revolving Facility contains customary representations, warranties and a springing financial covenant that requires a minimum
fixed charge coverage ratio of not less than 1.00 to 1.00. This ratio is applicable if borrowing availability causes a covenant trigger period, which only occurs when
borrowing availability falls below the greater of 10.0% of the maximum borrowing amount or $70.0 million. The Amended and Restated Revolving Facility also contains
negative covenants that may limit the ability of JBS USA and certain of its subsidiaries to, among other things:
. incur certain additional indebtedness;
. create certain liens on property, revenue or assets;
. make certain loans or investments;
. sell or dispose of certain assets;
. pay certain dividends and other restricted payments;
. prepay or cancel certain indebtedness;
. dissolve, consolidate, merge or acquire the business or assets of other entities;
. enter into joint ventures other than certain permitted joint ventures or create certain other subsidiaries;
. enter into new lines of business;
. enter into certain transactions with affiliates and certain permitted joint ventures;
. agree to restrictions on the ability of the subsidiaries to make dividends;
. agree to enter into negative pledges in favor of any other creditor; and
. enter into certain sale/leaseback transactions.
Events of Default: The Amended and Restated Revolving Facility also contains customary events of default, including failure to perform or observe terms, covenants
or agreements included in the Amended and Restated Revolving Facility, payment of defaults on other indebtedness, defaults on other indebtedness if the effect is to
permit acceleration, entry of unsatisfied judgments or orders against a loan party or its subsidiaries, failure of any collateral document to create or maintain a priority lien
and certain events related to bankruptcy and insolvency or environmental matters. If an event of default occurs the lenders may, among other things, terminate their
commitments, declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees and exercise remedies under the collateral
documents relating to the Amended and Restated Revolving Facility. At December 31, 2014, JBS USA was in compliance with all covenants.
ANZ credit facilities On March 7, 2011, JBS Australia entered into a secured facility to fund working capital needs and letter of credit requirements. The facility
includes a standby letter of credit limit of A$32.5 million and a A$20.0 million money market facility, subject to an annual review. On September 16, 2013, the facility was
restated to provide for a A$55.0 million trade finance loan facility limit and a A$23.7 million standby letter of credit limit. On June 18, 2014, the facility was restated to
increase the standby letter of credit limit to A$24.9 million. As of December 31, 2014, there were US$20.1 million of outstanding letters of credit and borrowing
availability of US$44.6 million.
4.39% secured notes due 2019 On December 20, 2010, JBS USA Holdings' wholly-owned subsidiaries, JBS USA and JBS Plainwell, Inc. issued 4.39% notes due
2019 in an aggregate principal amount of US$16.0 million to finance the construction of a cold storage warehouse. Interest is payable quarterly beginning on April 1,
2011. Principal is payable quarterly.
Marshalltown NMTC On March 10, 2011, Swift Pork entered into the Marshalltown NMTC transaction to finance the construction of a distribution center. Swift Pork
borrowed US$9.8 million at a 2.34% annual interest rate payable monthly for seven years. Of the total amount borrowed, US$7.2 million (Loan A) was indirectly
funded by JBS USA through a leverage loan and is included in judicial deposits and others within the Consolidated Balance Sheets. The remaining US$2.6 million
(Loan B) was funded by a local community development entity. At the end of the seven year period there is an option to dissolve the transaction through a put option
with an exercise price of US$1 thousand or a call option with an exercise price which will be calculated at its fair market value. If the put or call option is not exercised
then Loan A will begin to amortize over the remaining 28 years with principal and interest due monthly and a balloon payment for the remaining principal due March
2046. Loan B will continue to have interest only payments through 2046 at which time principal and interest are due.
Corporate building loans In October 2010, JBS USA Holdings acquired its corporate headquarters in Greeley, Colorado. It paid US$9.2 million in cash and
assumed US$20.1 million in mortgage debt. The debt is comprised of two mortgages in the amounts of US$17.0 million and US$3.1 million. The mortgages are
repayable in monthly installments, beginning on November 1, 2010. The mortgages mature on September 1, 2015 and June 1, 2020.
7.25% senior unsecured notes due 2021 - On May 27, 2011 JBS USA and JBS USA Finance. issued 7.25% notes due 2021 in an aggregate principal amount of
US$650.0 million primarily to make an intercompany loan to JBS USA Holdings, for further transfer to JBS S.A. to fund the repayment of short and medium-term debt of
JBS S.A. These notes are guaranteed by JBS USA Holdings, JBS S.A., JBS Hungary Holdings Kft., and each of the US restricted subsidiaries that guarantee the
Amended and Restated Revolving Facility (subject to certain exceptions). If certain conditions are met, JBS S.A. may be released from its guarantees.

39

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Interest on these notes is payable semi-annually in arrears on June 1 and December 1 of each year. The principal amount of these notes is payable in full on June 1,
2021. The original issue discount of approximately US$11.3 million is being accreted over the life of the notes.
On September 18, 2013, JBS USA and JBS USA Finance, issued US$500.0 million in aggregate principal as a follow on to its 7.25% senior notes due 2021 under the
indenture dated May 27, 2011. The proceeds from the issuance of these additional notes are being used to repay the outstanding principal amount of the 11.625%
notes due 2014 and to repay a portion of the borrowings under the Revolving Facility. The original issue discount of US$2.5 million is being accreted over the life of the
notes.
Covenants: The indenture for the 7.25% senior unsecured notes due 2021 contains customary negative covenants that limit JBS USA and its restricted subsidiaries
ability to, among other things:
incur additional indebtedness;
incur liens;
sell or dispose of assets;
pay dividends or make certain payments to our shareholders;
permit restrictions on dividends and other restricted payments by its restricted subsidiaries;
enter into related party transactions;
enter into sale/leaseback transactions; and
undergo changes of control without making an offer to purchase the notes.
Events of default: The indenture also contains customary events of default, including failure to perform or observe terms, covenants or other agreements in the
indenture, defaults on other indebtedness if the effect is to permit acceleration, failure to make a payment on other indebtedness waived or extended within the
applicable grace period, entry of unsatisfied judgments or orders against the issuer or its subsidiaries and certain events related to bankruptcy and insolvency matters.
If an event of default occurs, the trustee or the holders of at least 25.0% in aggregate principal amount of the notes then outstanding may declare such principal and
accrued interest on the notes to be immediately due and payable. At December 31, 2014, JBS USA and JBS USA Finance were in compliance with all covenants.
US$475 million term loan due 2018 On May 27, 2011, JBS USA entered into a credit agreement consisting of a term loan commitment of US$475.0 million primarily
to make an intercompany loan to JBS USA Holdings, for further transfer to JBS S.A. to fund the repayment of short and medium-term debt of JBS S.A. The loan is
guaranteed by JBS USA Holdings, JBS S.A., JBS Hungary Holdings Kft., and each of the U.S. restricted subsidiaries that guarantee the Amended and Restated
Revolving Facility (subject to certain exceptions). Loans under this agreement may be either Alternate Base Rate (ABR) loans or Eurodollar loans at the election of
JBS USA.
Interest on the ABR loans is based on ABR plus 2.0% with a 2.25% ABR floor or interest on the Eurodollar loans is based on LIBOR plus 3.0% with a 1.25% LIBOR
floor. Interest on ABR loans is payable on the last day of each calendar quarter while interest on Eurodollar loans is payable at the end of the associated interest period.
The outstanding principal is payable on May 25, 2018. The original issue discount of approximately US$2.4 million is being accreted over the life of the loan. The
covenants for this note contain customary negative covenants and customary events of default listed under the Amended and Restated Revolving Facility. On February
22, 2013, JBS USA amended the loan to reduce the ABR loan interest rate to ABR plus 1.75% with a 1.75% ABR floor and to reduce the Eurodollar loan interest rate to
LIBOR plus 2.75% with a 1.0% LIBOR floor. Commencing on March 29, 2013 and continuing until maturity, approximately US$1.2 million will be payable on the last
business day of each calendar quarter. At December 31, 2014, JBS USA was in compliance with all covenants.
Subsequent to the end of each fiscal year, a portion of JBS USA, LLCs cash flow must be used to repay outstanding principal amounts under the US$475 million term
loan due 2018. On March 31, 2014 JBS USA, LLC paid approximately US$54 million of its cash flow from 2013 toward the outstanding principal under the US$475
million term loan due 2018. The excess cash flow payment was applied to the minimum required installments with the remaining amount applied to the outstanding
principal amount. As a result of the excess cash flow payment, we are no longer required to make the quarterly installment payments.
US$500 million term loan due 2020 On September 18, 2013, JBS USA executed an increased facility activation notice consisting of a term loan commitment of
US$500.0 million in addition to the US$475.0 million term loan due 2018. The proceeds from the issuance of this loan were used to repay the outstanding principal
amount of the 11.625% notes due 2014 and to repay a portion of the borrowings under the Revolving Facility. The loan is guaranteed by JBS USA Holdings, JBS S.A.,
JBS Hungary Holdings Kft., and each of the U.S. restricted subsidiaries that guarantee the Revolving Facility (subject to certain exceptions). Loans under this
agreement may be either ABR loans or Eurodollar loans at the election of the Company. Interest on the ABR loans is based on ABR plus 1.75% with a 1.75% ABR floor
or interest on the Eurodollar loans is based on LIBOR plus 2.75% with a 1.00% LIBOR floor. Interest on ABR loans is payable on the last day of each calendar quarter
while interest on Eurodollar loans is payable at the end of the associated interest period. Commencing on December 31, 2013 and continuing until maturity, payments of
approximately US$1.3 million will be payable on the last business day of each calendar quarter. The outstanding principal is payable on September 18, 2020. The
original issue discount of US$2.5 million is being accreted over the life of the loan. The covenants for this note contain customary negative covenants and customary
events of default listed under the Revolving Facility. At December 31, 2014, JBS USA was in compliance with all covenants.

40

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
US$85 million term loan due 2016 On June 14, 2011, JBS Five Rivers obtained an US$85.0 million term loan which has a maturity date of June 14, 2016.
Repayment of the term loan is required to be made in 20 quarterly installments in the amount of US$1.4 million on the last day of each calendar quarter, with the
remaining unpaid principal balance due upon maturity. On November 7, 2014, JBS Five Rivers amended their term loan facility to, among other things, increase the
term loan to US$100.0 million through a term loan reload and extend the maturity to November 7, 2019. In addition to the amendment to the interest rate, amount and
maturity, the repayment of the term loan will continue to be repaid in 20 quarterly installments but will now be in the amount of US$1.25 million on the last day of each
calendar quarter, with the remaining unpaid principal balance due upon maturity. Borrowings under the term loan bear interest at variable rates based on applicable
LIBOR plus 2.75%, or based on the prime rate plus 1.5%. The proceeds from the term loan were advanced to J&F Oklahoma Holdings, Inc. (J&F Oklahoma), under
the note receivable from J&F Oklahoma. The term loan is secured by certain fixed assets, accounts receivable and inventories of JBS Five Rivers and accounts
receivable and inventories of J&F Oklahoma. J&F Oklahoma is a guarantor under the term loan agreement and while it is possible that J&F Oklahoma would be
required to repay the outstanding balance and certain other obligations and costs under the term loan as part of its guarantee, it is not probable at this time.
Covenants: The US$85.0 million term loan due 2016 contains customary negative covenants that limit JBS Five Rivers and its restricted subsidiaries ability to, among
other things:
incur certain additional indebtedness;
create certain liens on property, revenue or assets;
make certain loans or investments;
sell or dispose of certain assets;
pay certain dividends and other restricted payments;
dissolve, consolidate, merge or acquire the business or assets of other entities;
enter into new lines of business;
enter into certain transactions with affiliates;
issue, sell, assign, or otherwise dispose of certain equity interests;
enter into certain hedging agreements;
locate more than a certain number of owned cattle at locations not owned by JBS Five Rivers;
enter into certain cattle feeding joint ventures that contain restrictions on pledges and transfers of rights under the joint venture agreement; and
make certain advances to customers above certain thresholds.
Events of default The US$85.0 million term loan also contains customary events of default, including failure to perform or observe terms, covenants or agreements
included in the $85.0 million term loan agreement, payment of defaults on other indebtedness, defaults on other indebtedness if the effect is to permit acceleration, entry
of unsatisfied judgments or orders against a loan party or its subsidiaries, failure of any collateral document to create or maintain a priority lien, certain events related to
bankruptcy and insolvency, certain events related to the Employee Retirement Income Security Act of 1974 (ERISA), and failure to comply with the terms of the
Executive Succession Plan of J&F Oklahoma Holdings, Inc. If an event of default occurs the lenders may, among other things, terminate their commitments, declare all
outstanding borrowings to be immediately due and payable together with accrued interest and fees and exercise remedies under the collateral documents relating to the
US$85.0 million term loan. At December 31, 2014, JBS Five Rivers was in compliance with all covenants.
8.25% senior unsecured notes due 2020 On January 30, 2012, JBS USA, LLC and JBS USA Finance issued 8.25% notes due 2020 in an aggregate principal
amount of US$700.0 million. The proceeds were used (i) to make an intercompany loan to JBS USA Holdings, for further transfer to JBS S.A. to fund repayment of
short and medium-term debt of JBS S.A. and its subsidiaries and (ii) for general corporate purposes. These notes are guaranteed by JBS USA Holdings, JBS S.A., JBS
Hungary Holdings Kft., and each of the U.S. restricted subsidiaries that guarantee the Amended and Restated Revolving Facility (subject to certain exceptions). If
certain conditions are met, JBS S.A. may be released from its guarantees. Interest on these notes is payable semi-annually in arrears on February 1 and August 1 of
each year. The principal amount of these notes is payable in full on February 1, 2020. The original issue discount of approximately US$10.0 million is being accreted
over the life of the notes. The covenants for these notes contain customary negative covenants and customary events of default listed under the 7.25% senior
unsecured notes due 2021. At December 31, 2014, JBS USA was in compliance with all covenants.
LCAL facility On March 3, 2013, JBS Australia entered into a secured facility which provides up to A$4.4 million with Low Carbon Australia Limited ("LCAL"), to fund
a capital investment in energy efficiency technology and practices at JBS Australias processing plant located in Dinmore, Queensland. Interest under this facility is
based on the rate determined by LCAL to be equivalent to the Australian Financial Markets Association interest rate swap for a three year period and has a maturity
date of September 30, 2017.
Canadian Credit Facility: On May 15, 2013, JBS Canada entered into a credit agreement (the Canadian Credit Facility) with the Royal Bank of Canada (RBC) as
administrative agent and collateral agent, and other lenders party thereto. The Canadian Credit Facility currently provides a revolving dual currency facility of
CAD$110.0 million maximum borrowing availability that can be drawn in CAD$ and US$. Canadian dollar loans bear interest at the applicable Canadian Dealer Offered
Rate ("CDOR") or RBC Prime Rate plus applicable margins. US dollar loans bear interest at the applicable LIBOR or RBC borrowing rate plus applicable margins.
The Canadian Credit Facility also provides for a CAD$17.0 million term loan. The loan is guaranteed by JBS USA Holdings and JBS S.A. The loan amortizes over a 15
year period with principal and interest due monthly. The outstanding principal is payable on May 15, 2018. This loan is secured by certain real property of JBS Canada.
The covenants for this note contain customary negative covenants and customary events of default listed under the Canadian Credit Facility.
Availability:Actual borrowings under this facility are subject to a borrowing base, which is a formula based on eligible receivables, inventory, machinery and equipment
and real estate less certain eligibility and availability reserves. As of December 31, 2014, there were no outstanding letters of credit and borrowing availability of
US$28.5 million.
Security and guarantees: Borrowings made by JBS Canada under the Canadian Credit Facility are guaranteed by JBS USA Holdings and JBS S.A. Furthermore, the
borrowings are collateralized by a first priority perfected lien and interest in accounts receivable, finished goods, feed, live inventory and supply inventories, machinery
equipment and real estate.
Covenants: The Canadian Credit Facility contains customary representations, warranties and a springing financial covenant that requires a minimum fixed charge
coverage ratio of not less than 1.00 to 1.00. This ratio is applicable if borrowing availability causes a covenant trigger period, which only occurs when borrowing
availability falls below the greater of 10% of the maximum borrowing amount or CAD$10.0 million for five consecutive business days. The Canadian Credit Facility also
contains negative covenants that may limit the ability of JBS Canada to, among other things:

41

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
incur certain additional indebtedness;
create certain liens on property, revenue or assets;
make certain loans or investments;
sell or dispose of certain assets;
pay certain dividends and other restricted payments;
prepay or cancel certain indebtedness;
dissolve, consolidate, merge or acquire the business or assets of other entities;
enter into joint ventures other than certain permitted joint ventures or create certain other subsidiaries;
enter into new lines of business;
enter into certain transactions with affiliates and certain permitted joint ventures;
agree to restrictions on the ability of the subsidiaries to make dividends;
agree to enter into negative pledges in favor of any other creditor; and
enter into certain sale/leaseback transactions.
Events of default. The Canadian Credit Facility also contains customary events of default, including failure to perform or observe terms, covenants or agreements
included in the Canadian Credit Facility, payment of defaults on other indebtedness, defaults on other indebtedness if the effect is to permit acceleration, entry of
unsatisfied judgments or orders against a loan party or its subsidiaries, failure of any collateral document to create or maintain a priority lien and certain events related
to bankruptcy and insolvency or environmental matters. If an event of default occurs the lenders may, among other things, terminate their commitments, declare all
outstanding borrowings to be immediately due and payable together with accrued interest and fees and exercise remedies under the collateral documents relating to the
Canadian Credit Facility. At December 31, 2014, JBS Canada was in compliance with all covenants.
5.875% senior unsecured notes due 2024 On June 25, 2014, JBS USA, LLC and JBS USA Finance issued 5.875% notes due 2024 in an aggregate principal
amount of US$750.0 million primarily to make an intercompany loan to JBS USA Holdings, for further transfer to JBS S.A. to fund the repayment short- and mediumterm debt of JBS S.A. During the year ended December 31, 2014, the Company transferred approximately US$744.4 million of the proceeds to JBS S.A.. These notes
are guaranteed by the JBS USA Holdings, JBS S.A., JBS Hungary Holdings Kft., and each of the U.S. restricted subsidiaries that guarantee the Amended and Restated
Revolving Facility (subject to certain exceptions). If certain conditions are met, JBS S.A. may be released from its guarantees. Interest on these notes is payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2015. The principal amount of these notes is payable in full on July 15, 2024. The
covenants for these notes contain customary negative covenants and customary events of default listed under the 7.25% senior unsecured notes due 2021. At
December 31, 2014, JBS USA was in compliance with all covenants.
Andrews Meat Secured Facility - On October 24, 2014, Andrews Meat entered into a secured facility to fund working capital needs. The facility includes a cash
advance facility limit of A$6.0 million with interest based on the BBSY plus 0.8%, subject to an annual review. The facility is secured by certain real property of Andrews
Meat. On October 24, 2014, Andrews Meat borrowed A$6.0 million on the facility. All interest and principal are due on or before October 24, 2015.
Guarantee of J&F Oklahoma's revolving credit facility On October 7, 2008, J&F Oklahoma entered into a US$600.0 million secured revolving credit facility. This
credit facility and the guarantee thereof are secured solely by the assets of J&F Oklahoma and the net assets of JBS Five Rivers. This credit facility is used to acquire
cattle which are then fed in the JBS Five Rivers feedyards pursuant to the cattle supply and feeding agreement. The finished cattle are sold to JBS USA under the
cattle purchase and sale agreement. This facility was amended and restated on September 10, 2010 to provide availability up to US$800.0 million and to extend the
maturity date to September 23, 2014.
On June 14, 2011, J&F Oklahoma and JBS Five Rivers executed a third amended and restated credit agreement to increase the availability to US$1.0 billion and to
add J&F Australia as a borrower under the facility. The facility matures on June 14, 2015. On March 6, 2012, J&F Oklahoma and JBS Five Rivers executed an
amendment to the third amended and restated credit agreement to increase the availability up to US$1.2 billion. On January 24, 2013, J&F Oklahoma executed a fourth
amended and restated credit facility to add J&F Canada as a borrower under the facility, allow borrowings under additional currency options and extend the maturity
date to June 14, 2016. On November 7, 2014, J&F Oklahoma and JBS Five Rivers executed an amendment to the fourth amended and restated credit agreement to
increase the availability up to US$1.4 billion and extend the maturity date to November 7, 2019. Borrowings under the facility bear interest at variable rates based on
applicable LIBOR plus 1.75% to 2.25%, or based on the prime rate plus 0.5% to 1.0%. The interest rate at December 31, 2014 was 3.1%. As of December 31, 2014,
no borrowings were used towards letters of credit and the borrowing availability was US$115.5 million. As of December 31, 2014 and December 31, 2013, J&F
Oklahoma had US$ 1.3 billion and US$880.9 million, respectively, in outstanding borrowings on the facility.
The credit agreement is collateralized by accounts receivable and inventories of J&F Oklahoma and by certain fixed assets, accounts receivable and inventories of JBS
Five Rivers. Among other requirements, the facility requires J&F Oklahoma to maintain certain financial ratios, minimum levels of net worth and establish limitations on
certain types of payments, including dividends, investments and capital expenditures. In most instances, the covenants consider the combined position and results of
J&F Oklahoma along with JBS Five Rivers. J&F Oklahoma's parent company has entered into a keep-well agreement whereby it will make contributions to J&F
Oklahoma if J&F Oklahoma is not in compliance with its financial covenants under this credit facility. If J&F Oklahoma defaults on its obligations under the credit facility
and such default is not cured by its parent under the keep-well agreement, JBS Five Rivers is obligated for up to US$250.0 million of guaranteed borrowings plus
certain other obligations and costs under this credit facility. J&F Oklahoma was in compliance with the financial covenants under this credit facility as of December 31,
2014.
Credit facility to J&F Oklahoma JBS Five Rivers is party to an agreement with J&F Oklahoma pursuant to which JBS Five Rivers has agreed to loan up to
US$200.0 million in revolving loans to J&F Oklahoma. The loans are used by J&F Oklahoma to acquire feeder animals which are placed in JBS Five Rivers' feedyards
for finishing. Borrowings accrue interest at a per annum rate of LIBOR plus 2.25% and interest is payable at least quarterly. On September 26, 2011, the facility was
amended to accrue interest at a per annum rate of LIBOR plus 2.75%. On September 10, 2010, the facility was amended to extend the maturity date to September 11,
2016. On June 14, 2011, the facility was amended to increase availability under the loan to US$375.0 million. On January 24, 2013, the agreement was amended to
extend the facility up to US$450.0 million to fund working capital needs. The interest rate at December 31, 2014 was 3.0%.
US$250 million intercompany loan On July 12, 2007, a subsidiary of JBS USA issued a US$250.0 million intercompany loan to JBS Australia with an 8.0% interest
rate and a maturity date of July 12, 2017. While this loan eliminates upon consolidation, the loan is denominated in US$, but reported by JBS Australia in A$. Therefore,
the loan generates foreign currency transaction gains or losses due to fluctuations in the period end A$ to US$ exchange rate.
Credit facility to Sampco On April 1, 2010, JBS USA Holdings executed a US$60.0 million related party revolving promissory note with Sampco, Inc. (Sampco), an
indirect wholly-owned subsidiary of JBS S.A., with interest based on the three-month LIBOR plus a margin of 2.5% and a maturity date of March 31, 2012. On April 1,
2012, JBS USA Holdings and Sampco amended the related party revolving promissory note to increase the interest rate to the three-month LIBOR plus a 3% margin
and to extend the maturity date to March 31, 2014. On March 6,2014, the note was amended to extend the maturity date to March 31, 2016. The interest rate at
December 31, 2014 was 3.2%. This note eliminates upon consolidation.

42

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
US$10 million loan receivable from Weddel Limited - On May 10, 2011, JBS USA Holdings executed a US$10.0 million related party revolving promissory note with
Weddel Limited (Weddel), a wholly-owned subsidiary of JBS USA Holdings, with interest based on the U.S. Prime Rate plus a margin of 2.0% and a maturity date of
May 10, 2012. On May 8, 2012, the note was amended to extend the maturity date to March 31, 2013. On March 26, 2013, the note was amended to extend the
maturity date to March 31, 2014. On July 26, 2013, the note was amended to convert the note from a US$-denominated note to a CAD$10.0 million note and amend the
interest rate to be the Canadian Prime Rate plus 2.0%. On March 6, 2014, the note was amended to extend the maturity date to March 31, 2016. While this note
eliminates upon consolidation, the CAD$-denominated note will be reported by the Company in US$; therefore, this amended note will generate foreign currency
transaction gains or losses due to fluctuations in the period end CAD$ to US$ exchange rate. The interest rate at December 31, 2014 was 5.0%.
Revolving intercompany note to JBS USA Holdings - On June 2, 2011, JBS USA, LLC issued a US$2.0 billion revolving intercompany note to JBS USA Holdings.
The note bears interest at a variable rate equal to LIBOR plus 3.0%. On January 25, 2012, JBS USA, LLC amended the revolving intercompany note to increase the
maximum amount available under the note to US$3.0 billion. On September 30, 2013, JBS USA, LLC amended the revolving intercompany note to JBS USA Holdings
to increase the maximum amount available under the note to US$3.5 billion. On June 17, 2014 JBS USA, LLC amended the revolving intercompany note to increase
the maximum amount available under the note to US$4.0 billion to allow for the transfer of funds to JBS S.A. to fund the repayment of short and medium-term debt. On
August 20, 2014, JBS USA amended the revolving intercompany note to increase the maximum amount available under the note to US$4.25 billion. On December 17,
2014, JBS USA amended the revolving intercompany note to increase the maximum amount available under the note to US$5.5 billion. Principal and accrued interest
are due and payable upon demand by JBS USA, LLC at any time on or after August 20, 2016. The interest rate at December 31, 2014 was 3.2%. This note eliminates
upon consolidation.
JBS USA letters of credit - On October 26, 2011 and November 4, 2011, JBS USA, LLC agreed to provide letters of credit in the amount of US$40.0 million and
US$16.5 million, respectively to an insurance company serving PPC in order to allow that insurance company to return cash it held as collateral against potential
workers compensation, auto and general liability claims of PPC. In return for providing these letters of credit, PPC is reimbursing JBS USA for the cost PPC would have
otherwise incurred. During the year ended December 31, 2014, and December 31, 2013, PPC reimbursed JBS USA, LLC US$1.3 million and US$2.0 million,
respectively.
Note to Sampco - On March 15, 2012 Sampco executed a US$20.0 million revolving promissory note to JBS USA Holdings with interest based on the three-month
LIBOR plus a margin of 3%. On May 22, 2012, the note was amended to increase the maximum amount available to US$50 million. On September 18, 2012, the note
was amended to increase the maximum amount available to US$100.0 million. Principal and interest are due and payable upon demand by Sampco at any time on or
after March 31, 2014. On March 6, 2014, the note was amended to increase the maximum amount available to US$120.0 million and to extend the maturity date to
March 31, 2016. The interest rate at December 31, 2014 was 3.2%. This note eliminates upon consolidation.
Note to JBS Five Rivers - On April 20, 2012, JBS USA Holdings issued a US$100.0 million intercompany revolving promissory note to JBS Five Rivers with interest
based on the three-month LIBOR plus a margin of 3% and a maturity date of April 20, 2013 to fund working capital needs and general corporate purposes. On March 5,
2013, this note was amended to increase the maximum amount available under the note to US$175.0 million and to extend the maturity date to June 14, 2016. The
interest rate at December 31, 2014 was 3.2%. This note eliminates upon consolidation.
Note to JBS Canada - On January 2, 2013, JBS USA Holdings issued an intercompany revolving promissory note to JBS Canada for CAD$200.0 million with interest
based on the CDOR plus 3% and a maturity date of December 31, 2014 to fund working capital needs and general corporate purposes. On December 31, 2014 the
note was amended to extend the maturity date to December 31, 2017. The interest rate at December 31, 2014 was 4.3%. While this note eliminates upon consolidation,
the CAD$-denominated note will be reported by the JBS USA Holdings in US$; therefore, this note will generate foreign currency transaction gains or losses due to
fluctuations in the period end CAD$ to US$ exchange rate.
Description of Indebtedness of PPC
US Credit Facility PPC and certain of its subsidiaries entered into a credit agreement (the US Credit Facility) with CoBank ACB, as administrative agent and
collateral agent, and other lenders party thereto, which was amended and restated on August 7, 2013. As of December 31, 2014, the US Credit Facility provided for a
US$700.0 million revolving credit facility and a delayed draw term loan commitment of up to US$400.0 million (the "Delayed Draw Term Loan"). PPC can draw upon the
Delayed Draw Term Loan commitment, in one or more advances until December 28, 2014. The US Credit Facility also includes an accordion feature that allows PPC,
at any time, to increase the aggregate revolving loan commitment by up to an additional US$250.0 million and to increase the aggregate Delayed Draw Term Loan by
up to an additional US$500.0 million, in each case subject to the satisfaction of certain conditions, including obtaining the lenders' agreement to participate in the
increase and an aggregate limit on all commitments under the US Credit Facility of US$1.9 billion. The US Credit Facility also provides for a US$100 million sub-limit for
swingline loans and a US$200.0 million sub-limit for letters of credit. The revolving loan commitment under the U.S. Credit Facility matures on August 7, 2018. Any
Delayed Draw Term Loans would be payable in quarterly installments beginning in fiscal year 2015 equal to 1.875% of the principal outstanding as of December 28,
2014, with all remaining principal and interest due at maturity on August 7, 2018.
Subsequent to the end of each fiscal year, a portion of PPCs cash flow was required to be used to repay outstanding principal amounts under the Term B loans. On
December 30, 2013, PPC paid US$204.9 million of its cash flow toward the outstanding principal under the Term B loans. On April 28, 2014, PPC paid US$205.2
million of its cash flow toward the outstanding principal under the Term B loans. Following this payment, PPC had no outstanding principal under the Term B loans. The
US Credit Facility also requires PPC to use the proceeds it receives from certain asset sales and specified debt or equity issuances and upon the occurrence of other
events to repay outstanding borrowings under the US Credit Facility.
Actual borrowings by PPC under the revolving credit commitment component of the US Credit Facility are subject to a borrowing base, which is a formula based on
certain eligible inventory, eligible receivables and restricted cash under the control of CoBank ACB. As of December 31, 2014, the applicable borrowing base was
US$700.0 million. As of December 31, 2014, there were US$20.1 million of outstanding letters of credit and borrowing availability of US$680.0 million.
The US Credit Facility contains financial covenants and various other covenants that may adversely affect PPCs ability to, among other things, incur additional
indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain assets sales, enter into certain transactions with JBS USA Holdings
and PPCs other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of PPCs assets. The US Credit Facility requires PPC to comply with a
minimum level of tangible net worth covenant. PPC is currently in compliance with this financial covenant.
All other financial covenants were eliminated in connection with the August 7, 2013 amendment and restatement to the US Credit Facility. The US Credit Facility also
provides that PPC may not incur capital expenditures in excess of US$350.0 million in any fiscal year.
All obligations under the US Credit Facility are unconditionally guaranteed by certain of PPCs subsidiaries and are secured by a first priority lien on (i) the accounts
receivable and inventories of PPC and its non-Mexico subsidiaries, (ii) 65% of the equity interests in PPC's direct foreign subsidiaries and 100% of the equity interests
in PPCs other subsidiaries, (iii) substantially all of the personal property and intangibles of the borrowers and guarantors under the US Credit Facility and (iv)
substantially all of the real estate and fixed assets of PPC and the guarantor subsidiaries under the US Credit Facility.

43

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Senior Unsecured Notes due 2018 - PPC's 2018 Notes -On December 15, 2010, PPC issued US$500.0 million of 7.875% Senior Notes due 2018 (the PPC's 2018
Notes). The PPC's 2018 Notes are unsecured obligations of PPC and guaranteed by one of PPCs subsidiaries. Interest is payable on December 15 and June 15 of
each year, commencing on June 15, 2011. The indenture governing the PPC's 2018 Notes contains various covenants that may adversely affect PPCs ability to,
among other things, incur additional indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain asset sales, enter into certain
transactions with the Company and PPCs other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of its assets. PPC has subsequently
exchanged these notes for substantially identical notes that are registered under the Securities Act of 1933.
Mexico ING Credit Facility - On October 19, 2011, Avcola PPSRLCV and certain other Mexican subsidiaries, entered into an amended and restated credit agreement
(the Mexico ING Credit Facility) with ING Bank (Mxico), S.A. Institucin de Banca Mltiple, ING Grupo Financiero, as lender and ING Capital, LLC, as administrative
agent. The Mexico ING Credit Facility had a final maturity date of September 25, 2014. The Mexico ING Credit Facility was secured by substantially all of the assets of
PPC's Mexican subsidiaries. The Mexico ING Credit Facility was terminated on July 23, 2014.
Mexico Bancomer Credit Facility - On July 23, 2014, Avcola and certain Mexican subsidiaries entered into an unsecured credit agreement (the Mexico Credit
Facility) with BBVA Bancomer, S.A. Institucin de Banca Mltiple, Grupo Financiero BBVA Bancomer, as a replacement of the Mexico ING Credit Facility. The loan
commitment under the Mexico Credit Facility is 560.0 million Mexican pesos. Outstanding borrowings under the Mexico Credit Facility accrue interest at a rate equal to
the Interbank Equilibrium Interest Rate plus 1.05%. The Mexico Credit Facility has a maturity date on July 23, 2017. As of December 31, 2014, the US dollar equivalent
of the loan commitment under the Mexico Credit Facility was US$38.1 million. There are currently no outstanding borrowings under the Mexico Credit Facility.

17

Operating and Finance leases

The Company and its subsidiaries have operating leases and financial leases agreements, as described below:
Operating Leases:
In the Company:
The Company has operational leases agreements of industrial complexes, tanneries and distribution centers based in the states of Bahia, Gois, Maranho, Mato
Grosso, Mato Grosso do Sul, Par, Rio de Janeiro e So Paulo.
In the Consolidated
The subsidiary JBS USA has operational lease agreements for warehouses, commercial offices and vehicles maintenance facilities in the United States of America, as
well marketing offices in Asia, distribution centers and warehouses in Australia. Addionally, JBS USA leases equipments, over the road transportation vehicles and
other assets.
The subsidiary JBS Foods through its subsidiaries Seara Alimentos and JBS Aves is a tenant of productive units in the states of Rio de Janeiro, Rio Grande do Sul,
Mato Grosso do Sul, Santa Catarina, Paran and So Paulo.
The future minimum payments of noncancellable operational leases of with terms exceeding one year are as follows:

For the years ending December:

2015
2016
2017
2018
2019
Thereafter 2020
Total

Company

Consolidated

December 31, 2014

December 31, 2013

32,631
30,126
18,729
14,048
14,016
55,591
165,141

232,782
207,475
174,737
127,281
122,621
189,331
1,054,227

The operational leases payments recognized as expenses at the years ended in December 31, 2014 and 2013 totalized R$ 31,006 and R$ 22,566 in the Company and
R$ 276,629 and R$ 245,073 in the consolidated.
Finance Leases:
In the consolidated
The subsidiary JBS USA has financial lease agreements referring to wastewater treatment facility in Kentucky and Texas, which the book value recorded on property,
plant and equipment is detailed below:
Annual
Depreciation
Rates
Wastewater treatment facility
Total

9%

Cost

Accumulated
Depreciation

December 31,
2014

December 31,
2013

97,214

(27,646)

69,568

67,101

97,214

(27,646)

69,568

67,101

44

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The future minimum payments of noncancellable finance leases with terms exceeding one year are as follows:

Present value
For the years ending December:
2015
2016
2017
2018
2019
Thereafter 2020
Total

18

Future payments

7,552
7,050
4,274
3,251
3,118
36,284
61,529

401
258
101
56
32
8
856

7,953
7,308
4,375
3,307
3,150
36,292
62,385

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

120,057
159,038
1,848
12,913
208
190,984
35,907

111,665
138,898
1,073
11,712
261
152,189
92,109

637,780
1,499,047
505,799
7,128
80,297
828
221,699
297,613

476,293
1,217,222
19,760
3,221
54,925
1,657
382,393
311,004

520,955

507,907

3,250,191

2,466,475

369,756
151,199

382,741
125,166

2,611,077
639,114

1,761,296
705,179

520,955

507,907

3,250,191

2,466,475

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

484,013

220,494

484,013

220,494

484,013

220,494

484,013

220,494

Income taxes, payroll, social charges and tax obligation

Company
Payroll and related social charges
Accrual for labor liabilities
Income taxes
Withholding income taxes
ICMS / VAT / GST tax payable
PIS / COFINS tax payable
Taxes in installments
Others
Breakdown:
Current liabilities
Noncurrent liabilities

19

Consolidated
December 31, 2014
Adjustment to
present value

Consolidated

Declared dividends
Consolidated

Company
Declared dividends

Proposed dividends on 2012 - Residual

Proposed dividends on 2013 - Residual
Proposed dividends on 2014

230
254
483,529
484,013

The Company has declared dividends in December 31, 2014 of R$ 483,529 to be submitted to the General Meeting of Shareholders for approval according to the
calculation presented below:
2014
2,035,910
(101,795)
1,934,115
483,529
483,529

Net income of the year

Legal reserve - (5%)
Adjusted base for dividends calculation
Mandatory dividends (25%)
Declared dividends

2013
926,907
(46,345)
880,562
220,140
220,140

The residual amount of dividends corresponds to the unpaid dividends due to lack of updated bank information. These pending items by some minority shareholders
avoid the realization of fully payment. The Company sent notification to such shareholders to update their information so the amount would be paid. The liability will be
maintained during the statutory period in the short term, since once the register is updated, the payment is automatic.

20

Payables related to facilities acquisitions

Consolidated

Company
Current
Noncurrent

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

47,894
44,904

95,853
62,754

344,881
490,461

264,264
463,485

92,798

158,607

835,342

727,749

In Company:
The payables related to facilities acquisitions in the Company is related primarily to acquisitions of assets and other industrial complexes based in the States of Acre,
Bahia, Mato Grosso, Mato Grosso do Sul, Rondnia and Gois.

45

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
In the Consolidated
i) R$ 149,350 in the indirect subsidiary JBS Aves related to the acquisition in June, 2013 of assets and industrial complexes of Ana Rech, to implement the activity of
hogs slaughtering and refrigeration, as well as industrialization and sub-products, being R$ 49,350 classified in the short term and R$ 100,000 classified in the long
term.
ii) R$ 150,552 in the subsidiary JBS Foods S.A. related to the remaining debit assumed by Marfrig S.A. with BR Foods S.A. by the time of the acquisition of the assets.
With the sale of Seara by Marfrig, the assets bought was transferred along with the debits to JBS S.A., being R$ 36,013 classified in the short term and R$ 114,359
classified in the long term.
iii) R$ 158,098 in the subsidiary JBS Foods S.A. refers to the acquisition of the plant of slaughtering and processing of pigs in Carambe - PR that was leased by BR
Foods S.A. on May 31, 2014, being R$ 79,049 classified in the short term and R$ 79,049 classified in the long term.
iv) R$ 102,178 in the indirect subsidiary JBS Aves is related to the acquisition in March, 2013 of the company Agrovneto that explores an activity similar to JBS Aves,
where the amount is recorded in the long term.
v) R$ 22,808 in the indirect subsidiary JBS Aves refers to the Frinal's acquisition occurred on June, 2014, which is engaged in the activity of creating, slaughter and
marketing of pork, being R$ 10,808 classified as short term and R$ 12,000 classified as long term.
vi) R$ 21,415 in the subsidiary JBS Global Meat related to debts to Midtown acquisition, classified as short term.
vii) R$ 8,000 in the subsidiary JBS Aves refers to the Avebom's acquisition occurred on August, 2014, which is engaged in the activity of industrialization and
commercialization of food products, breeding activity of broiler chickens and hogs for slaughtering, production of pet food and concentrates and meat industrialization,
classified as short term.
viii) R$ 9,768 in the indirect subsidiary Seara Alimentos refers to the Sul Valle's acquisition occurred on March, 2014, which is engaged in the activity of creating,
slaughter and marketing of pork, classified as short term.
ix) R$ 28,645 in the indirect subsidiary JBS Aves is related to the acquisition in October, 2014 of the company Novagro, which explores the activity of commercialization
of food products, breeding activity of broiler chickens for slaughtering, production of pet food and concentrates.,being R$ 7,115 classified as short term and R$ 21,530
classified as long term.
ix) R$ 91,730 in the indirect subsidiary Seara Alimentos is related to the acquisition of Property, plant and equipment in October, 2014 of the company Cu Azul, being
R$ 75,469 classified as short term and R$ 16,261 classified as long term.

21

Income taxes - Nominal and effective tax rate reconciliation

Income tax and social contribution are recorded based on taxable profit in accordance with the laws and applicable rates. Deferred Income tax and social contributionassets are recognized on temporary differences and fiscal loss. Income tax and social contribution tax-liabilities were recorded on the revaluation reserves established
by the Company and on temporary differences.
Company
2014
Income before income taxes

Consolidated
2013

2,007,794

2014

1,192,116

2013

4,191,823

1,774,995

Expectation of expense of the income taxes - Combined nominal of 34%

(682,650)

(405,319)

(1,425,220)

(603,498)

Adjust to demonstrate the effective rate

Additions, mostly result on equity subsidiaries, foreign income, goodwill
amortization and tax equivalents in other countries
Income (expense) of the deferred income taxes

710,766
28,116

140,110
(265,209)

(360,176)
(1,785,396)

(53,172)
(656,670)

-22.25%

-42.59%

-37.00%

Effective rate

1.40%

Explanative notes
Composition of expenses of income tax and social contribution presented income statements of the Company and Consolidated results for the years ended on
December 31, 2014 and 2013.
Company
2014

Consolidated
2013

2014

2013

Current income taxes

46,851

(1,656,879)

(166,231)

Deferred income taxes

(18,735)

(267,589)

(128,517)

(490,439)

28,116

(265,209)

(1,785,396)

(656,670)

2,380

Composition of deferred income tax and social contribution

Company

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

382,251

417,598

962,294

1,027,330

. On goodwill amortization, revaluation reserve and temporary differences

1,554,762

1,508,571

3,802,260

3,146,924

Net

1,172,511

1,090,973

2,839,966

2,119,594

ASSETS
. On tax losses and temporary differences
LIABILITIES

Deferred income taxes

Deferred income taxes is generated by temporary differences at reporting date between the taxable basis of assets and liabilities and its accounting basis. Deferred
taxes liabilities are recognized for all temporary tax differences, except:

46

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
- when the deferred tax liability arises from initial recognition of goodwill, or when the deferred tax asset or liability asset from the initial recognition of an asset or liability
in a transaction that is not a business combination and, on the transaction date, does not affect the accounting net income or taxable profit or fiscal loss;
- when taxable temporary differences related to investments in subsidiaries, can be controlled and it is probable that the temporary differences will not be reversed in
the foreseeable future; and
- on the deductible temporary differences associated with investments in associates and in subsidiaries, when it is not probable that the temporary difference will
reverse in the foreseeable future and that taxable profit will be available for the temporary differences can be utilized.

22

Provision for lawsuits risk

The Company and its subsidiaries are parties in several proceedings arising in the regular course of business, for which provisions were established based on
estimation of their legal counsel. The main information related to these procedures on December 31, 2014 are as follows:
Company

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

Labor
Civil
Tax and Social Security

63,845
11,103
103,478

57,769
9,951
96,331

241,104
78,261
386,479

163,466
75,035
610,823

Total

178,426

164,051

705,844

849,324

Changes in provisions

December 31,
2013

Sul Valle, Frinal,

Massa Leve,
Avebom and
Eleven's
Acquisition

Additions

Company

164,051

14,375

Consolidated

849,324

18,668

24,300

(1)

Exchange rate
variation

Reversals

(178,368)

December 31, 2014

(8,080)

178,426
705,844

- The acquisitions in the amount of R$ 18,668 refers to Sul Valle, Massa Leve, Frinal, Avebom and Eleven in the consolidated of JBS Foods S.A.

Tax Proceedings
a) ICMS - Value Added Tax (Imposto sobre Operaes Relativas Circulao de Mercadorias e sobre a Prestao de Servios de Transporte Interestadual
e Intermunicipal e de Comunicao)
The Tax Authority of the State of So Paulo (Secretaria da Fazenda do Estado de So Paulo) filed 215 administrative proceedings against the Company, under which
the Tax Authority challenges the amount of the Companys ICMS tax credits arising from the purchase of cattle and meat transfer by the Company in other Brazilian
states. The Tax Authority of the State of So Paulo claims that the tax incentives should be approved by Confaz , and are known as a "Tax War". The Tax Authority of
the State of So Paulo does not recognize the Companys ICMS tax credits up to the amount of the ICMS tax guaranteed in such other states. The Company estimates
that the claims under these administrative proceedings amount to R$ 1,752,138 in the aggregate in December 31, 2014. In addition to presenting its defense in such
administrative proceedings, the Company has filed legal proceedings seeking the payment of damages from such other states if the Tax Authority of the State of So
Paulo prevails in these administrative proceedings.
Management believes, based on the advice of its legal counsel, that its arguments will prevail in these procedures, which is the reason why no provision has been
made.
b) Social contributions Rural Workers Assistance Fund (FUNRURAL)
Social Contributions In January 2001, the INSS (Brazilian Social Security Institute) filed administrative proceedings (autos de infrao) against the Company, seeking
to collect certain social security contributions (which are referred to as contributions to the Rural Workers Assistance Fund - NOVO FUNRURAL). This sentence was
reformulate by the Federal Regional Court of 3rd region. The Company filed an extraordinary appeal, which was halted on the basis of Article 543-B, 1 of the Code of
Civil Procedure, until the final decision of the Supreme Court on the matter. To avoid the institution to lose the right to require the contribution to the New Funrural, INSS
released tax notifications, in a total of 20 infringement notices, in the amount of R$ 949,192.
The Company has presented its defense in those administrative proceedings, informing that it does not collect the amount due to a favorable court ruling, considering
that there is no final decision of the writ of mandamus mentioned.
This matter was the subject of decisions favorable to the taxpayer, issued by the Supreme Court - STF for companies whose activities are similar to the activity of the
Company in the trials of Extraordinary Appeals number 363.852/MG and 596.177/RS. Currently, the Company does not make any rebate or payment. If a discount is
made for commercial reasons, the Company will deposit it in court and, fulfill a court order. Based on the opinion of legal advisors and based on case law in favor of the
Supreme Court in a similar case, management believes that its fundamentals will prevail and no provision was recorded for that contingency. The probability of loss is
considered remote.
c) Other tax and social security procedures
The Company is a party in additional 1030 tax and social security proceedings, in which the individual contingencies are not relevant for the Company's context. We
highlight that the ones with probable loss risk have contingencies for R$ 103,478 which are 100% accrued in December 31, 2014.
Labor Proceedings
As of December 31, 2014 the Company was party to 12.994 labor and accident proceedings, involving total value of R$ 1,964,220. Based on the opinion of the
Companys external legal counsel, the Companys management recorded a provision in the amount of R$ 63,845 for losses arising from such proceedings. Most of
these lawsuits were filed by former employees of the Company seeking overtime payments and payments relating to their exposure to health hazards.

47

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Civil Proceedings
a) Slaughter facility at Araputanga
In 2001, the Company (formerly known as Friboi Ltda.), entered into a purchase agreement with Frigorfico Araputanga S.A. (Frigorfico Araputanga) for the acquisition
of one property and slaughter facilities located in Araputanga, State of Mato Grosso. Frigorfico Araputanga was a beneficiary of certain tax benefits and the property
was floating charge, for this reason it was required the consent of SUDAM (Superintendncia de Desenvolvimento da Amaznia) for the registration of the public deed
with the applicable real estate notary.
In September, 2004, Frigorfico Araputanga filed a lawsuit against the Company, alleging that the Company had not paid the price and had not obtained the consent of
that authority, requiring the ineffectiveness of the contract. The case was referred to the Federal Court of Cceres, due to the Union's interest in the dispute. The
Company obtained the consent of UGFIN, successor SUDAM, according to the 5 Chamber of the Federal Court of the 1 Region decision, thereby obtaining effective
registration of the deed of purchase and sale.
The second forensic accounting were presented which, like the first, confirmed that the Company paid the purchase price of the property and industrial facilities located
in Araputanga, MT. The parties have spoken about the forensic accounting report and the case was taken in charge by AGU for the manifestation of the forensic
accounting report . The probability of loss is considered remote, no provision was recorded.
b) Trademark Infringement
Also due to the barrier in Araputanga / MT, the seller distributed in the City of Araputanga / MT, filed a lawsuit for improper use of trademark, under the premise that
Friboi Ltda. was using the mark Frigoara without its authorization.
The amounts of the claim were based upon a report presented by Frigorfico Araputanga to the trial court, which appraised the value of the trademark Frigoara at R$
315,000, seeking damages in the amount of R$ 100,000 and punitive damages in the amount of R$ 26,938. The Company presented its defense against this lawsuit
alleging that (i) the lawsuit should be analyzed and reviewed together with the lawsuit relating to the purchase of the slaughter facility from Frigorfico Araputanga by the
Company, (ii) the trademark Frigoara was used by the Company for a limited period of time, with the written consent and upon the request of Frigorfico Araputanga
(the use of the trademark by the Company was a requirement of SUDAM to consent to the registration of the public deed contemplating.
In the defense, the amount of any damages under the lawsuit should be limited to a percentage of products sold by the Company under the trademark Frigoara,
pursuant to article 208 of the Intellectual Property Law. Almost all of the products manufactured by the Company were marketed under the trademark Friboi. The only
product marketed by the Company under the trademark Frigoara was minced meat, in limited amounts. The expected loss on December 31, 2014, R$ 600, has been
provisioned.
c) Other civil proceedings
The Company is also part to other civil proceedings that in the opinion of the Management and its legal advisers. The expected loss on December 31, 2014, R$ 10,503,
has been provisioned.
Other proceedings
In December 31, 2014, the Company had other ongoing civil, labor and tax proceedings, on the approximately amounting of R$ 105,969, whose materialization,
according to the evaluation of legal advisors, it is possible to loss, but not probable, for which the Company's management does not consider necessary to set a
provision for possible loss, in line with the requirements of the IAS 37/CPC 25 - Provisions, Contingent Liabilities and Contingent Assets.
In JBS Foods Ltda.
Labor Proceedings
As of December 31, 2014 the subsidiaries of JBS Foods S.A. was party to 7,678 labor proceedings, involving total amount of R$ 685,957. Based on the opinion of the
company's external legal council, the management recorded a provision in the amount of R$ 167,473 for losses arising from such proceedings. Most of these lawsuits
are related to actions that deal with seeking damages for occupational disease, physical and aesthetical damage, seeking overtime payments, payments relating to their
exposure to health hazards, commuting time, interval for thermal recovery, seeking damages for accidents and exchanging uniform.
Civil proceedings
As of December 31, 2014 the subsidiaries of JBS Foods S.A. was party to 2,326 civil and administrative proceedings, involving total amount of R$ 287,867. Based on
the opinion of the company's external legal council, the company's management recorded a provision in the amount of R$ 63,025 for losses arising from such
proceedings. Most of the lawsuits are related to indemnity for collective seeking damages, seeking damages for improper protest, repairing damages for termination of
partner poultry or pigs integration, cancellation of industry or trade mark complaints and consumer contracts - product quality.
Tax Proceedings
a) Risk in the glosses of claims - PIS/COFINS
In between the years of 2003 to 2013 the indirect subsidiary Seara Alimentos has sent requests for electronics reimbursement of PIS/COFINS to the Federal Revenue
of Brazil. The tax authorities have assessed the applications for compensation for periods relating to the 4th quarter of 2009 and perpetuated an initial gloss of about
47% of the value, causing fiscal proceedings with probable losses in the approximately amount of R$ 166,534.
b) Others tax proceedings
On December 31, 2014 the companies of JBS Foods S.A. was party of others 374 tax proceedings, in which the contingencies individually do not present relevant in
their contexts. We emphasize that the proceedings considered as probable of losses are properly provisioned, in the amount of R$ 109,340.

23

Equity
a) Capital Stock
The Capital Stock on December 31, 2014 is R$ 21,506,247 and it is represented by 2,943,644,008 ordinary shares, without nominal value. From this total, as
described below in the letter f), 54,829,482 shares are held in treasury.
The Capital Stock is presented with a net effect in the balance sheet in the amount of expenses of R$ 54,865, being expenses of the period of 2010 in the amount of R$
37,477 related to the costs of the transaction for securing resources to Initial Public Offering, and expenses in the amount of R$ 17,388 regarding the debentures
issuance for the period of 2011.

48

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The Company is authorized to increase its capital by an additional 1,376,634,735 ordinary nominative shares. According with the social statute the Board of Directors
shall determine the number, price, payment term and other conditions of the issuance of shares.
The Company may grant options to purchase shares to directors, employees or persons who will provide services, or the directors, employees or person providing
services companies under its control, excluding the preemptive rights of shareholders in issuing and exercise of stock options.
b) Capital reserve
Composed of premium on issuance of shares, on the Initial Public Offering in 2007.
- Negotiation Premiums with trading options of "JBSS3"
The Board of Directors of the Company approved on October 2, 2014, the possibility of selling Put options on JBSS3 shares in Bovespa, in accordance to the
guidelines of CVM Instruction 390, which among other terms, determines that i) the maturity of the Put option must not exceed six months from the trade date, and ii)
the premium received by selling Put options on JBSS3 should be allocated as collateral on BMF&Bovespa. The Board of Directors also authorized the execution of
other operations with shares and options referenced on JBSS3, exclusively for protecting the position of open options or to unwind them.
Below is the summary of the operations executed at the year ended in December 31, 2014:

Date

Number of option

Class and type of

shares

Maturity of options

Premiums received

Mark-to-Market

Oct 3, 2014

1,350,700

JBSSW6

Nov 17, 2014

189

189

Oct 14, 2014

2,000,000

JBSSM92

Jan 19, 2015

550

Oct 15, 2014

80,000

JBSSW6

Nov 17, 2014

Oct 16, 2014

1,569,300

JBSSW6

Nov 17, 2014

78

78
212

Oct 20, 2014

1,000,000

JBSSX9

Dec 15, 2014

212

Oct 21, 2014

1,000,000

JBSSW6

Nov 17, 2014

83

83

Oct 27, 2014

1,000,000

JBSSW6

Nov 17, 2014

40

40

Oct 27, 2014

1,000,000

JBSSX9

Dec 15, 2014

308

308

Nov 27, 2014

1,000,000

JBSSN40

Feb 9, 2015

185

Dec 1, 2014

2,000,000

JBSSN40

Feb 9, 2015

518

Dec 3, 2014

1,000,000

JBSSN40

Feb 9, 2015

285

Dec 22, 2014

1,000,000

JBSSN40

Feb 9, 2015

330

Dec 22, 2014

2,000,000

JBSSO10

Mar 16, 2015

350

914

Total kept in capital reserve:

c) Profit reserves
Legal reserve
Computed based on 5% of the net income of the year.
Statutory for expansion

Consists of the remaining balance of the net income after the computation of legal reserve and dividend distribution. The purpose of this reserve is to provide funds to
investment in assets.
Subsequent events: On March 9, 2015, the Board of Directors approved to submit for approval of Ordinary and Extraordinary Shareholders General Meeting 2015 of
the Company: i) the amendment of the title of this reserve to Statutory reserve for investments, for greater clarity purposes, ii) Partial capitalization of this reserves
balance accrued until December 31, 2013, without the issuance of new shares and iii) Approval of amendment in the Companys bylaws so that, among other
amendments, the balance applied in this reserve be annually and systematically capitalized, by annual approval of the Board of Directors, without the need of approval
in a General Meeting.
d) Revaluation reserve
Refers to revaluations on fixed assets prior to CPC/IFRS adoption. Revaluation reserve reflects the appraisal effected by the Company, net of tax effects that are
progressively offset against retained earnings to the same extent that the increase in value of the revalued property is realized through depreciation, disposal or
retirement.
e) Dividends
Mandatory dividends corresponds to not less than 25% of the adjusted net income of the year, according to law.
f) Treasury shares
On June 24, 2014, the Board of Directors approved the transference of 26,295,997 treasury shares, pursuant to Article 19, section XVI of the Social Statute, as part of
the acquisition of the total shares of Comrcio e Indstrias de Massas Alimentcias Massa Leve Ltda. "Massa Leve", in which the amount agreed by the transference of
the treasury shares was in the amount of R$ 203,531.
Below is presented the changes on treasury shares:
Quantity

R$ thousand

Balance as of December 31, 2013

75,190,179

595,849

Transfer of treasury shares

(26,295,997)

(208,384)

Purchase of treasury shares

Balance as of December 31, 2014

5,935,300

64,235

54,829,482

451,700

49

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
g) The Effects of Changes in Foreign Exchange Rates
According to CPC 02 R2/IAS 21 -The Effects of Changes in Foreign Exchange Rates, basically records changes in foreign currency rates of the subsidiaries valued by
the equity method (translation adjustments).
According to CPC 37 R1 / IFRS 1 - First Time Adoption of International Accounting Standards, under the term of the CPC 02 R2 before the date of initial adoption, the
adopting of IFRS for the first time should cancel the balances of exchange variation of investments recorded in equity (under the rubric of accumulated translation
adjustments) transferring it to retained earnings or loss (profits reserves) and divulge distribution policy applicable to such outstanding results. The Company does not
compute these adjustments to the distribution of profit.
h) Capital Transactions
According to IAS 27/CPC 36 R3 - Financial Statements, the changes in the relative share of the parent over a subsidiary that do not result in loss of control must be
accounted as capital transactions (ie transactions with shareholders, as owners). Any difference between the amount by which the participation of noncontrolling has
been adjusted and the fair value of the amount received or paid must be recognized directly in equity attributable to owners of the parent.
Therefore, if the parent acquire additional shares or other equity instruments of an entity that already controls, it should consider this value to reduce its equity
(individual and consolidated).

24

Net revenue
Company
Gross sale revenue
Products sales revenues
Domestic sales
Foreign sales
Sales deduction
Returns and discounts
Sales taxes
NET REVENUE

25

Consolidated

2014

2013

17,166,154
11,190,836
28,356,990

14,596,188
8,247,513
22,843,701

(1,072,289)
(1,173,803)
(2,246,092)

(779,060)
(1,088,686)
(1,867,746)

26,110,898

20,975,955

2014

2013

86,957,361
38,185,927
125,143,288
(2,561,113)
(2,112,456)
(4,673,569)
120,469,719

70,562,815
25,461,185
96,024,000
(1,730,467)
(1,390,735)
(3,121,202)
92,902,798

Financial income (expense), net

Company
2014
Exchange rate variation
Results on derivatives
Interest expense
Interest income
Taxes, contribution, tariff and others

(1,752,952)
330,391
(1,874,857)
506,324
(60,301)
(2,851,395)

Consolidated
2013
(1,371,351)
580,518
(1,212,346)
413,573
(59,227)
(1,648,833)

2014
(1,891,811)
982,011
(3,167,087)
556,265
(116,998)
(3,637,620)

2013
(1,369,979)
679,903
(2,165,588)
575,992
(100,659)
(2,380,331)

Results from daily settlements of future contracts used to protect assets and liabilities, as well as the marked to market value of instruments traded over the counter
with the same purpose of protection are recognized under Results on Derivatives. For the year ended on December 31, 2014 the net effect in the results amounted to
(R$ 1,422,561) in the Company and (R$ 909,800) in the Consolidated level.
The amount of interest expense of R$ 1,874,857 for the year ended on December 31, 2014 includes the payment of the early extinguishment fee of US$ 40,901 (R$
108,641) related to the early extinguishment of JBS S.A.'s Notes 2016 and Bertin S.A.'s Notes 2016.

26

Other income (expenses)

Other income for the year ended on December 31, 2014, in the consolidated, in the amount of R$ 385,655 relates mainly to:
i) Other expenses in JBS Argentina in the amount of R$ 10,173, related to the labor indemnity, result of the sale of fixed assets and others with less sprayed
representativeness;
ii) Other income in JBS USA in the amount of R$ 30,690, basically due to rental income and income from sale of fixed assets and scrap;
iii) Other expenses in JBS Foods in the amount of R$ 2,451, basically due to donations to political parties, gain on sale of fixed assets and others with less
representativeness;
iv) Other expenses in the Company in the amount of R$ 403,721 referring basically due to the donations to political parties, result of the sale of fixed assets and others,
individually with less representativeness.

50

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
27

Net income per share

As required by the IAS 33/CPC 41 - Earnings per share, the following tables reconcile the net profit with the amounts used to calculate the basic per share.
Basic
The basic net profit per share is calculated through the division of the profit attributable to the shareholders of the Company by the weighted average amount of shares
of the fiscal year, reduced by the shares in treasury.
Consolidated
2014
Net income attributable to shareholders - R$
Average of the shares in the period - thousands
Average of the shares in the Treasury - thousands
Average of shares circulating - thousands
Net income per thousand shares - Basic - R$

2,035,910
2,943,644
(61,907)
2,881,737

2013
926,907
2,943,644
(76,762)
2,866,882

706.49

323.32

Diluted
The Company did not present the calculation of the diluted net income per share as required in IAS 33/CPC 41 - Profit per share, due the fact it does not have
potentially dilutive ordinary shares. The deferred revenue transaction (Note 30) through historical analysis is expected to be settled by future delivery, and therefore is
not potentially dilutive.

28

Transaction costs for the issuing of titles and securities

In accordance with the prerequisites under IAS 39/CPC 38 Financial Instruments Recognition and assessment, the costs related to the transactions in the issuance
of notes and securities are accounted reducing the liabilities that they refer to.
Follows below, in detail, the operations which the Company incurred transaction costs, in other words, i.e., incurred costs directly attributable to the activities that are
necessary to effect these transactions, exclusively.
a) Initial Public Offering of shares - IPO (Follow on)
In the year end on December 31, 2010, the Company incurred in R$ 37,477 related to the transaction costs of the process of raising funds through the Public Offering,
which accounting is kept prominently in a reduction account of the equity, deducting any effects.
b) Exchange for Common Shares of Vigor Alimentos SA ("The Exchange Tender Offer")
In June 2012, the Company incurred in transaction costs on the amount of R$ 324 related to the acquisition process of 117,800,183 shares of its own issue, which is
kept prominently in a reduction account of equity, deducting any effects.
c) Senior Notes Offering (Bonds)
During the year of December 31, 2010, the Company incurred in R$ 17,789 related to the transaction costs for financial funding with Senior Notes Offering (Bonds)
in the amounts of US$ 700 million and US$ 200 million realized on July and September of 2010, respectively, recorded as a reduction of the loan. On December 31,
2014, due to accumulated amortization of the amount based on the payments period, the Company has a residual amount of R$ 4,919 of transaction cost related to
debt that will continue to be amortized in accordance with the period of the contract.
On June 2012, the Company incurred in R$ 13,699 related to the transaction costs in the process of amending certain dispositions of the Notes 2016 from JBS S.A.
and Notes 2016 from Bertin S.A. through the consent of the holders of such Notes. These costs are maintained prominently in a reduction account of the liability. On
December 31, 2014, because of accumulated amortization based on the recorded payments term period reduction, the Company has a residual amount of R$ 2,646 of
transaction costs related to debt that will continue to be amortized according to the period of the contract.
On February 2013, the Company incurred in R$ 27,649 related to the transaction costs of the process of raising funds through issues of Senior Notes Offering (Bonds)
in the amount of US$ 775 million in March, 2013, which accounting is kept prominently in a reduction account of liability. On December 31, 2014 due to accumulated
amortization of the amount based on the payments term period, the Company has a residual amount of R$ 23,458 of transaction cost related to the debt that will
continue to be amortized in accordance with the period of the contract.
On October 2013, the Company incurred in R$ 15,630 related to the transaction costs of the process of raising funds through issues of Senior Notes Offering (Bonds) in
the amount of US$ 1 billion in October 2013, which accounting is kept prominently in a reduction account of liability. On December 31, 2014 due to accumulated
amortization of the amount based on the payments term period, the Company has a residual amount of R$ 12,852 of transaction cost related to the debt that will
continue to be amortized in accordance with the period of the contract.
On April, 2014, the Company incurred in R$ 9.924 related to the transaction costs of the process of raising funds through issues of Senior Notes Offering (Bonds) in the
amount of US$ 750 million in April 2014, which accounting is kept prominently in a reduction account of liability. On December 31, 2014 due to accumulated
amortization of the amount based on the payments term period, the Company has a residual amount of R$ 9,420 of transaction cost related to the debt that will continue
to be amortized in accordance with the period of the contract.
d) Other Funding
In June 2012, the Company incurred in R$ 6,000 related to the transaction costs of the processes of funding Working capital in the amount of R$ 1 billion, which
accounting is maintained in a reduction account of the loan. On December 31, 2014, because of the accumulated amortization of the balance based on the payments
term period, the Company has a residual amount of R$ 2,951 of transaction cost related to debt that will continue to be amortized according to the period of the
contract.
In October 2013, the Company incurred in R$ 4,800 related to the transaction costs of the processes of funding Working capital in the amount of R$ 800,000 which
accounting is maintained in a reduction account of the loan. On December 31, 2014, because of the accumulated amortization of the balance based on the payments
term period, the Company has a residual amount of R$ 3,300 of transaction cost related to debt that will continue to be amortized according to the period of the
contract.

51

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
In February 2014, the Company incurred in R$ 843 related to the transaction costs of the processes of funding prepayment export (PPE) in the amount of R$ 144,471
which accounting is maintained in a reduction account of the loan. On December 31, 2014, because of the accumulated amortization of the balance based on the
payments term period, the Company has a residual amount of R$ 685 of transaction cost related to debt that will continue to be amortized according to the period of the
contract.

29

Defined Benefit and Contribution Plans

JBS Plans
The Company sponsors a tax-qualified employee savings and retirement plan (the 401(k) Savings Plan) covering its US based employees, both union and non-union,
excluding PPC employees. Pursuant to the 401(k) Savings Plan, eligible employees may elect to reduce their current compensation by up to the lesser of 75% of their
annual compensation or the statutorily prescribed annual limit and have the amount of such reduction contributed to the 401(k) Savings Plan. The 401(k) Savings Plan
provides for additional matching contributions by the Company, based on specific terms contained in the 401(k) Savings Plan. The trustee of the 401(k) Savings Plan,
at the direction of each participant, invests the assets of the 401(k) Savings Plan in participant designated investment options. The 401(k) Savings Plan is intended to
qualify under Section 401 of the Internal Revenue Code ("IRC"). The Company's expenses related to the matching provisions of the plan were $7.1 million (R$ 18,739)
and $6.4 million (R$ 13,809) for the years ended December 31, 2014 and 2013, respectively.
One of the Companys facilities participates in a multi-employer pension plan. The Companys contributions to this plan, which are included in cost of goods sold in the
Consolidated Statements of Income, were $440 thousand (R$ 1,161) and $426 thousand (R$ 919) for the years ended on December 31, 2014 and 2013, respectively.
Pursuant to a settlement agreement, the Company also participates in a multi-employer pension plan related to former employees at the idle Nampa, Idaho plant. The
Company made contributions to this plan of $75 thousand (R$ 198) and $71 thousand (R$ 153) for the years ended on December 31, 2014 and 2013, respectively.
One of the Companys facilities participates in a supplemental executive retirement plan. During the years ended on December 31, 2014 and 2013, the Company
recognized expense for this plan of $594 thousand (R$ 1,568) and $54 thousand (R$ 117), respectively, which is included in general and administrative expenses in the
Consolidated Statements of Income.
Employees of JBS Australia do not participate in the Companys 401(k) Savings Plan. Under Australian law, JBS Australia contributes a percentage of employee
compensation to a Superannuation fund as required by the Australian Superannuation Act of 1997. Effective July 1, 2013, the superannuation rate was increased to
9.25% of employee cash compensation. Effective July 1, 2014, the superannuation rate was increased to 9.5% of employee cash compensation. As the funds are
administered by a third party, once this contribution is made to the Superannuation fund, JBS Australia has no obligation for payments to participants or oversight of the
fund. The Companys expenses related to contributions to this fund totaled $27.3 million (R$ 72,055) and $31.5 million (R$ 67,965) for the years ended December 31,
2014 and 2013, respectively.
PPC Plans
PPC sponsors programs that provide retirement benefits to most of their employees. These programs include qualified defined benefit pension plans, non-qualified
defined benefit retirement plans, a defined benefit postretirement life insurance plan and defined contribution retirement savings plans. Under all of PPC's retirement
plans, PPC's expenses were $5.9 million (R$ 15,572) and $7.5 million (R$ 16,182) for the years ended December 31, 2014 and 2013, respectively.
Qualified Defined Benefit Pension Plans:
the Pilgrims Pride Retirement Plan for Union Employees (the Union Plan);
the Pilgrims Pride Pension Plan for Legacy Gold Kist Employees (the GK Pension Plan).
The Union Plan covers certain locations or work groups within PPC. The GK Pension Plan covers certain eligible US employees who were employed at locations that
PPC acquired in its acquisition of Gold Kist, Inc. ("Gold Kist") in 2007. Participation in the GK Pension Plan was frozen as of February 8, 2007 for all participants with
the exception of terminated vested participants who are or may become permanently and totally disabled. The plan was frozen for that group as of March 31, 2007.
Non-qualified Defined Benefit Retirement Plans:
the Former Gold Kist Inc. Supplemental Executive Retirement Plan (the SERP Plan); and
the Former Gold Kist Inc. Directors Emeriti Retirement Plan (the Directors' Emeriti Plan).
PPC assumed sponsorship of the SERP Plan and Directors' Emeriti Plan through its acquisition of Gold Kist in 2007. The SERP Plan provides benefits on
compensation in excess of certain IRC limitations to certain former executives with whom Gold Kist negotiated individual agreements. Benefits under the SERP Plan
were frozen as of February 8, 2007. The Directors Emeriti Plan provides benefits to former Gold Kist directors.
Defined Benefit Postretirement Life Insurance Plan:
the Gold Kist Inc. Retiree Life Insurance Plan (the Retiree Life Plan).
PPC also assumed defined benefit postretirement medical and life insurance obligations, including the Retiree Life Plan, through its acquisition of Gold Kist in 2007. In
January 2001, Gold Kist began to substantially curtail its programs for active employees. On July 1, 2003, Gold Kist terminated medical coverage for retirees age 65
and older, and only retired employees in the closed group between ages 55 and 65 could continue their coverage at rates above the average cost of the medical
insurance plan for active employees. These retired employees reached the age of 65 by 2012 and liabilities of the postretirement medical plan ended.
Defined Benefit Plans Obligations and Assets
The change in benefit obligation, change in fair value of plan assets, funded status and amounts recognized in the Consolidated Balance Sheets for these plans were
as follows:
December 31, 2013

December 31, 2014

Change in projected benefit obligation
Projected benefit obligation, beginning of year
Interest cost
Actuarial losses
Benefits paid
Curtailments and settlements
Projected benefit obligation, end of year

Pension Benefits
451,634
21,523
65,528
(32,283)
(659)
505,743

Other Benefits
4,529
215
(27)
(316)
4,401

Pension Benefits

Other Benefits

455,481
18,633
(56,960)
(18,842)
398,312

4,528
183
(216)
(501)
3,994

52

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)

December 31, 2014

Change in plan assets
Fair value of plan assets, beginning of the year
Actual return on plan assets
Contributions by employer
Benefits paid
Curtailments and settlements
Fair value of plan assets, end of year

Pension Benefits

December 31, 2013

Other Benefits

288,187
10,476
35,896
(32,283)
(659)
301,617

316
(316)
-

December 31, 2014

Funded status

Unfunded benefit obligation

Pension Benefits

(4,401)

December 31, 2014

Amounts recognized in the Consolidated Balance Sheets
Accrued benefit cost, current
Accrued benefit cost, long-term
Net amount recognized

Amounts recognized in the Consolidated Income Statement

Net actuarial losses

Pension Benefits

(342)
(4,059)
(4,401)

December 31, 2014

Pension Benefits
Other Benefits
91,787

501
(501)
-

Pension
Benefits

Other Benefits

(144,150)

(3,994)

December 31, 2013

Other Benefits

(24,896)
(179,230)
(204,126)

Other Benefits

216,182
38,627
18,195
(18,842)
254,162
December 31, 2013

Other Benefits

(204,126)

Pension Benefits

(203)

Pension
Benefits

Other Benefits

(21,426)
(122,724)
(144,150)

(347)
(3,647)
(3,994)

December 31, 2013

Benefits
Other Benefits
36,587

(272)

The accumulated benefit obligation for the defined benefit pension plans was $190 million (R$ 504,678) and $170 million (R$ 398,242) at December 31, 2014 and 2013,
respectively. Each of PPC's defined benefit pension plans had an accumulated benefit obligation that exceeded the fair value of plan assets at both December 31,
2014 and 2013.
The following table provides the components of net periodic benefit cost (income) for the plans:
December 31, 2014
Net Periodic Benefit Cost
Interest cost
Estimated return on plan assets
Settlement loss (gain)
Amortization of net loss (gain)
Net periodic benefit cost

Pension Benefits

December 31, 2013

Other Benefits

21,387
(16,821)
245
29
4,840

214
(24)
190

Pension
Benefits

Other Benefits

17,162
(11,636)
2,035
7,561

168
(32)
136

The following table presents the weighted average assumptions used in determining the pension and other postretirement plan obligations:
December 31, 2014
Pension Benefits
Benefit obligation
Discount rate
Net pension and other postretirement costs:
Discount rate
Rate of compensation increase
Expected return on plan assets

December 31, 2013

Other Benefits

Pension
Benefits

Other Benefits

4.22%

4.22%

4.95%

4.95%

4.95%
NA
6.00%

4.95%
NA
NA

4.22%
NA
6.00%

4.22%
NA
NA

The expected rate of return on plan assets was determined based on the current interest rate environment and historical market premiums relative to the fixed income
rates of equities and other asset classes. PPC also takes in consideration anticipated asset allocations, investment strategies and the views of various investment
professionals when developing this rate.
The following table reflects the pension plans' actual asset allocations:

Equity securities
Fixed income securities
Total assets

December 31,
2014
66%
34%
100%

December 31,
2013
68%
32%
100%

Absent regulatory or statutory limitations, the target asset allocation for the investment of pension assets in the pooled separate accounts is 50% in each of fixed
income securities and equity securities and the target asset allocation for the investment of pension assets in the common collective trust funds is 30% in fixed income
securities and 70% in equity securities. The plans only invest in fixed income and equity instruments for which there is a ready public market. PPC develops their
expected long-term rate of return assumptions based on the historical rates of returns for equity and fixed income securities of the type in which PPC's plans invest.

53

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The fair value measurements of plan assets fell into the following levels of the fair value hierarchy in December 31, 2014 and 2013:
December 31, 2014
Level 1
Cash and money market funds
Equity securities
Debt securities
Total assets

Level 2
88
88

199,303
102,227
301,529

December 31, 2013

Total

Level 1

Level 2
644
644

88
199,303
102,227
301,617

Total

171,431
82,087
253,518

644
171,431
82,087
254,162

Benefit Payments
Because PPC pension plans are primarily funded plans, the anticipated benefits with respect to these plans will come primarily from the trusts established for these
plans. Because PPC's other postretirement plans are unfunded, the anticipated benefits with respect to these plans will come from PPC's own assets. The following
table reflects the benefits as of December 31, 2014 expected to be paid in each of the next five years and in the aggregate for the five years thereafter from PPC's
pension and other postretirement plans:
Pension Benefits
35,747
34,363
33,208
31,261
29,957
138,539
303,075

2015
2016
2017
2018
2019
Thereafter
Total

Other Benefits
302
305
305
305
305
1,469
2,989

PPC anticipates contributing $9.4 million (R$ 24,968) and $100 thousand (R$ 234) to their pension and other postretirement plans, respectively, during the remainder of
2015.
Unrecognized Benefit Amounts in Other Comprehensive Income
The amounts in other comprehensive income adjustments that were not recognized as components of net periodic benefits cost and the changes in those amounts are
as follows:
December 31, 2013

December 31, 2014

Pension Benefits
20,537
(29)
(245)
65,113
6,411
91,787

Net actuarial loss (gain), beginning of the year

Amortization
Curtailment and settlement adjustments
Liability loss (gain)
Asset loss (gain)
Net actuarial loss (gain), end of the year

Other Benefits
(201)
24
(26)
(203)

Pension Benefits
95,225
(2,035)
(52,463)
(23,939)
16,788

Other Benefits
2
32
(199)
(165)

Defined Contribution Plans

PPC currently
The Pilgrims Pride Retirement Savings Plan (the RS Plan), a Section 401(k) salary deferral plan; and
The To-Ricos Employee Savings and Retirement Plan (the To-Ricos Plan), a Section 1165(e) salary deferral plan.
PPC also maintains three postretirement plans for eligible Mexico employees as required by Mexico law that primarily cover termination benefits. Separate disclosure of
the Mexican plan obligations is not considered material.
Under the RS Plan, eligible US employees may voluntarily contribute a percentage of their compensation. PPC matches up to 30% of the first 2.14% to 6% of salary
based on the salary deferral and compensation levels up to $245 thousand (R$ 651). The To-Ricos Plan is maintained for certain eligible Puerto Rican employees.
Under the To-Ricos Plan, eligible employees may voluntarily contribute a percentage of their compensation and there are various company matching provisions.
Certain retirement plans that PPC sponsors invest in a variety of financial instruments. Certain postretirement funds in which PPC participates hold significant amounts
of mortgage-backed securities. However, none of the mortgages collateralizing these securities are considered subprime.
PPC Incentive Compensation:
PPC sponsors a performance-based, omnibus long-term incentive plan that provides for the grant of a broad range of long-term equity-based and cash-based awards
to PPCs officers and other employees, members of the Board of Directors of PPC and any consultants (the LTIP). The equity-based awards that may be granted
under the LTIP include incentive stock options, within the meaning of the IRC, nonqualified stock options, stock appreciation rights, restricted stock awards ("RSAs")
and restricted stock units ("RSUs"). At December 31, 2014, PPC has reserved approximately 6.6 million shares of common stock for future issuance under the LTIP.

The following awards existed at December 31, 2014:

Award Type
RSA
RSA
RSU
RSA
RSA
RSU
RSU

Benefit Plan
Employment
LTIP
LTIP
LTIP
LTIP
LTIP
LTIP

Award
Quantity
100,000
72,675
608,561
15,000
15,000
206,933
462,518

Grant Date
Jan 14, 2011
Aug 27, 2012
Feb 4, 2013
Feb 25, 2013
Feb 25, 2013
Feb 26, 2013
Feb 19, 2014

Vesting Condition
Service
Service
Service
Service
Service
Service
Service

Vesting Date
Jan 03, 2014
Apr 27, 2014
Dec 31, 2014
Feb 24, 2015
Feb 24, 2016
Dec 31, 2014
Dec 31, 2016

Estimate
Forfeiture Rate
9.66%
13.49%

Settlement
Method
Stock
Stock
Stock
Stock
Stock
Stock
Stock

The fair value of each RSA and RSU granted represents the closing price of PPCs common stock on the respective grant date.

54

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The following table presents compensation costs and the income tax benefit recognized for PPC's share-based compensation arrangements:
December 31,
2014
Share-based compensation costs:
Costs of goods sold
Selling, general and administrative expenses
Total
Income tax benefit

December 31,
2013

1,043
11,964
13,007

779
6,441
7,220

3,500

1,016

PPCs restricted share and restricted stock unit activity is included below:
December 31, 2013

December 31, 2014

Number

Weighted Average

Number

Weighted Average

RSAs:
Outstanding at beginning of year
Granted
Vested
Outstanding at end of year

203
(173)
30

17
16
23

273
30
(100)
203

14
19
15
14

RSUs:
Outstanding at beginning of year
Granted
Forfeited
Outstanding at end of year

729
463
(72)
1,120

23
44
27
32

815
(86)
729

19
19
19

The total fair value of shares vested during the years ended on December 31, 2014 and 2013 was $1.1 million (R$ 2,922) and $700 thousand (R$ 1,640), respectively.
At December 31, 2014, the total unrecognized compensation cost related to all nonvested awards was $5.9 million (R$ 15,572). That cost is expected to be recognized
over a weighted average period of 2 years.
Historically, PPC has issued new shares to satisfy award conversions.
Bertin USA Plans
Bertin USA has a defined benefit and a supplemental benefit pension plan covering retirees meeting certain age and service requirements. The plan benefits are based
primarily on years of service and employees compensation. The funding policy is to meet ERISA funding requirements and to accumulate plan assets, which will, over
time, approximate the present value of projected benefits payable. Plan assets are invested solely in a group annuity contract. The defined benefit and supplemental
benefit plans were frozen on December 31, 1995.
Bertin USA also provides certain health care and life insurance benefits for certain retired and terminated employees based on contractual obligations incurred by the
previous owners of JBS USA Trading, Inc., formerly known as SB Holdings, Inc., doing business as The Tupman Thurlow Co., Inc. Bertin USA has elected immediate
recognition of the unfunded accumulated postretirement benefit obligation in conjunction with the purchase of the common stock of JBS USA Trading. The
postretirement payments are funded in monthly installments. For the years ended December 31, 2014 and 2013, service cost, interest cost, estimated return on plan
assets and net periodic benefit cost were immaterial.
During the years ended December 31, 2014 and 2013, Bertin USA funded $271 thousand (R$ 715) and $287 thousand (R$ 619), respectively, to its defined benefit
plan.
JBS Canada Plans
JBS Canada participates in the Canada Pension Plan (the CPP), a government provided pension plan required for all employees aged 18 to 70 who are not recipients
of any retirement or disability pension under the CPP, who do not participate in the Quebec Pension Plan and whose earnings exceed the years basic exemption of
CAD$3,500 (R$ 7,454). The contribution rate is equal to 9.9% of the employment earnings in excess of the basic exemption up to the maximum pensionable earnings.
The employee and the employer must each pay half of the contribution. JBS Canadas expenses related to the matching provisions of the plan were $4.6 million
(R$12,141) and $4.4 million (R$ 9,278) for the years ended on December 31, 2014 and 2013, respectively.
JBS Canada also provides a group of Registered Retirement Savings Plans (RRSP) to union and non-union employees. A RRSP is an arrangement between an
individual and an issuer (e.g. an insurance company or a trust company) under which contributions are made by individuals and a retirement income is payable at
maturity. Contributions are tax deductible and investment earnings are tax-free. Payments out of a RRSP are taxable upon receipt. JBS Canada offers a group of
RRSPs issued by Sun Life Assurance Company of Canada. JBS Canadas expenses related to the matching provisions of the plan were $900 thousand (R$ 2,375) and
$1.3 million (R$ 2,805) for the years ended on December 31, 2014 and 2013, respectively.
JBS Foods Plans
JBS Foods offers to its employees additional benefit pension plan. The Pension Plan is closed and managed by Multipensions Bradesco. Since May 20, 2010, the
defined benefit plan is closed to new members.
In addition, the plan guarantees the employee the right to continue health care after shutdown of the company. On December 31, 2014 this liability is recorded in the
amount of R$ 11,728.
The technical report used to calculate the need for new provisions is held annually, being the last calculation performed on December 31, 2014 and is therefore not
expect significant changes for the short-term due to the immateriality of the balances.

30

Deferred revenue
On October 22, 2008, JBS USA received a deposit in cash from a customer of $175.0 million for the customer to secure an exclusive right to collect a certain byproduct of the beef fabrication process in all of our US beef plants. This agreement was formalized in writing as the Raw Material Supply Agreement ("Supply
Agreement") on February 27, 2008 and matures on December 30, 2016. The customer's advance payment was recorded as deferred revenue. As the by-product is
delivered to the customer over the term of the agreement, the deferred revenue is recognized within gross sales in the Consolidated Statements of Income.

55

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
To provide the customer with security, in the unlikely event JBS USA was to default on its commitment, the payment is evidenced by the Supply Agreement which bears
interest at the three-month LIBOR plus 2%. The interest rate at December 31, 2014 was 2.3%. In the event of default, the Supply Agreement provides for a conversion
into shares of common stock of JBS USA Holdings based on a formula stipulated in the Supply Agreement. Assuming default had occurred on December 31, 2014, the
conversion right under the Supply Agreement would have equaled 2.96% of the outstanding common stock, or 2.96 shares.
The Supply Agreement contains affirmative and negative covenants which require JBS USA to, among other things: maintain defined market share; maintain certain
tangible net worth levels; and comply in all material respects with the Supply Agreement. JBS USA was in compliance with all covenants as of December 31, 2014.
During the second quarter of 2012, the customer ceased taking product from JBS USA and, since the Supply Agreement makes no provision for an alternate form of
calculating the repayment of the unamortized balance, JBS USA continues to accrue interest on the unamortized balance. JBS USA is in discussions with the customer;
however, no agreement has been reached. The unamortized balance at both December 31, 2014 and 2013 was approximately $100.8 million, being R$ 267,745 and
R$ 236,134, respectively. At December 31, 2014 and 2013, JBS USA had accrued interest of $6.5 million (R$ 17.265) and $4.1 million (R$ 9.605) , respectively. At
December 31, 2014 and 2013, other deferred revenue was $9.4 million (R$ 24.968) and $2.5 million (R$ 5.857), respectively.

31

Operating segments
According to IFRS 8/CPC 22 - Operating segments, Management has defined the operational segments that report to the Group, based on the reports use to make
strategic decisions, analyzed by the Executive Board of Officers, which are segmented as per the commercialized product point of view, and per geographical location.
The modalities of commercialized products include Beef, Chicken and Pork. Geographically, the Management takes into account the operational performance of its
unities in Brazil, USA (including Australia, Canada and Mexico) and South America (Brazil, Argentina, Paraguay and Uruguay).
The Beef segment performs slaughter facility, cold storage and meat processing operations for the production of beef preservatives, fat, feed and derivate products
located in Brazil, United States of America, Canada, Australia, Argentina, Uruguay, Paraguay, the latter three with consolidated analyzes, as well as in United States of
America, Australia, Canada and Mexico.
The Chicken segment is represented by "in natura" products, refrigerated as a whole or in pieces, whose productive units are located in United States of America,
Mexico and Brazil, servicing restaurant chains, food processors, distributors, supermarkets, wholesale and other retail distributors, in addition to exporting to the
Eastern Europe (including Russia), the Eastern Hemisphere (including China), Mexico and other international markets.
The Pork segment is presented by the segment of slaughters, processing, cold storage of pork meat, delivers "in natura" meat and manufacture of products and
subproducts of the same origin. It operates in Brazil and Unites States of America, servicing the internal and the foreign market. The products also include specific
industrial standards cuts, refrigerated.
Due to the significant percentage of the above-mentioned operational segments, the remaining segments and activities in which the Company acts are not relevant and
are presented as "Others". In addition, all operations between segments will be eliminated in the group.
The accounting policies of the operational segments are the same as the ones described in the significant accounting policies summary. The Company evaluates its
performance per segment, based on the profit or the losses before taxes, and it does not include the non-recurrent gains and losses and the exchange losses.
There are no revenues arising out of transactions with one only foreign client that represent 10% or more of the total revenues.
The information per businesses' operational segment, analyzed by the Executive Board of Officers, and related to the period ended on December 31, 2014 and 2013,
are as following:

Net revenue by product modality:

Net revenue of the segment

Beef
Chicken
Pork
Others
Total

2014

2013

74,296,387
29,084,489
12,288,497
4,800,346

60,428,280
21,038,991
7,927,262
3,508,265

120,469,719

92,902,798

Depreciation by product modality:

2014

2013

Depreciation and amortization

Beef
Chicken
Pork
Others

827,963
1,241,583
229,181
248,050

763,589
957,224
93,156
224,848

Total

2,546,777

2,038,817

December 31, 2014

December 31, 2013

Beef
Chicken
Pork
Others

38,750,314
18,986,167
6,136,535
18,170,666

41,218,032
13,817,172
4,516,202
9,118,815

Total

82,043,682

68,670,221

Assets by modality of product:

Assets

56

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Net revenues by geographic area:
Net revenue
United States of America
South America
Others
Total

2014

2013

79,206,777
39,082,053
2,180,889

65,126,919
25,820,529
1,955,350

120,469,719

92,902,798

Depreciation by geographic area:

2014

2013

Depreciation and amortization

United States of America
South America
Others

1,411,684
1,125,484
9,609

1,305,725
715,315
17,777

Total

2,546,777

2,038,817

Assets by geographic area:

December 31,
2014
Assets
United States of America
South America
Others
Total

32

December 31,
2013

23,823,509
57,708,970
511,203
82,043,682

19,889,926
46,696,020
2,084,275
68,670,221

Expenses by nature
The Company opted for the presentation of the Statements of Income per function. The following table details expenses by nature:

33

Consolidated

Company

Company
Classification by nature

2014

2013

2014

2013

Depreciation and amortization

Personnel expense
Raw material use and consumption materials
Taxes, fees and contributions
Third party capital remuneration
Other income, net

(570,514)
(2,623,481)
(20,777,980)
(2,263,235)
(7,503,377)
5,731,574

(515,215)
(1,893,446)
(16,614,887)
(2,462,340)
(6,435,043)
7,197,903

(2,546,777)
(11,846,712)
(96,349,744)
(5,011,202)
(10,749,847)
10,200,283

(2,038,817)
(9,260,005)
(77,239,518)
(3,508,676)
(8,100,544)
9,013,035

(28,007,013)

(20,723,028)

(116,303,999)

(91,134,525)

Classification by function

2014

2013

Cost of goods sold

Selling expenses
General and administrative Expenses
Financial expense, net
Other expense, net

(20,401,293)
(2,739,927)
(1,610,677)
(2,851,395)
(403,721)
(28,007,013)

(15,808,619)
(2,183,117)
(1,072,208)
(1,648,833)
(10,251)
(20,723,028)

2014
(101,796,347)
(7,154,335)
(3,330,042)
(3,637,620)
(385,655)
(116,303,999)

2013
(81,056,088)
(5,262,199)
(2,519,993)
(2,380,331)
84,086
(91,134,525)

Insurance coverage
As of December 31, 2014, in the Company, the maximum individual limit for coverage was R$ 150,000. This coverage includes all types of casualties.
Regarding the indirect subsidiary JBS Argentina, located in the Republic of Argentina, the insurance policy has the same above-mentioned characteristics; however,
the maximum indemnification limit for December 31, 2014 was of US$ 32 million (equivalent to R$ 84,998).
Regarding the subsidiary JBS USA, located in the USA, the insurance policy has the same above-mentioned characteristics; however, the maximum indemnification
limit for December 31, 2014 was of US$ 250 million (equivalent to R$ 664,050).
Regarding the JBS Foods S.A., the insurance policy has the same above-mentioned characteristics; however, the maximum indemnification limit for December 31,
2014 was of R$ 150,000.

34

Risk management and financial instruments

The Company and its subsidiaries incur, during the regular course of their operations, exposures to market, credit and liquidity risks. Those exposures are managed in
an integrated way by the Risk Management Department, following directives from the Financial and Commodities Risk Management Policy defined by the Risk
Management Committee and approved by the Board of Directors.
The Risk Management Department is responsible for mapping all the risk factors that may bring adverse financial results for the Company and propose strategies to
mitigate those risks. Their proposals are submitted to the Risk Management Committee for further submission to the Board of Directors, which supervises the
implementation of new solutions, noting limitations of scope and guidelines of the Financial and Commodities Risk Management Policy.

57

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
a) Market Risk
In particular, the exposure to market risk is continuously monitored, especially the risk factors related to foreign exchange, interest rates and commodity prices, which
directly affect the value of financial assets and liabilities, future cash flow and net investments in operations abroad. In these cases the Company and its subsidiaries
may use financial hedge instruments, including derivatives, given the approval by the Board of Directors.
It is the function of the Risk Management Department to ensure that other areas of operations are within the exposure limits set by management, are financially
protected against price fluctuations, centralizing the exposures and applying the Financial and Commodities Risk Management Policy of the Company.
The Risk Management Department uses proprietary and third party information systems specially developed to control and manage market risk, applying stress
scenario and Value at Risk analysis (VaR) to measure the net exposure as well as the cash flow risk with the exchanges.
a.1) Interest rate risk
Interest rate risk is related to potentially adverse results that may arise from oscillations in interest rates, which may be caused by economic crisis, sovereign monetary
policy alterations, or market movements. The Company has assets and liabilities exposed to interest rates like the CDI (Certificado de Depsito Interbancrio Interbank Deposit Certificate), TJLP (Taxa de Juros de Longo Prazo - Long Term Interest Rate), UMBNDES (Unidade Monetria do BNDES - BNDES Monetary Unit),
LIBOR (London Interbank Offer Rate) and EURIBOR (Euro Interbank Offer Rate), among others. The Financial and Commodities Risk Management Policy does not
define the proportion between float and fixed exposures, but the Risk Management Department monitors market conditions and may propose to the Risk Management
Committee strategies to rebalance the exposure.
The Board understands that quantitative figures regarding the exposure to interest rate risks of the Company and its subsidiaries on December 31, 2014 and 2013 are
presented below in accordance with the Financial and Commodities Risk Management Policy and are representative of the exposure incurred during the period in
accordance with paragraph 35 of CPC 40 R1.
Company
Net liabilities and assets exposure to CDI rate:

December 31, 2014

Consolidated

December 31, 2013

December 31, 2014

December 31, 2013

(5,656,305)
4,509,936
804,738

(6,552,326)
3,148,005
286,719

(6,807,645)
4,775,249
1,766,650

(7,026,294)
3,236,034
1,063,744

(341,631)

(3,117,602)

(265,746)

(2,726,516)

Working Capital - Euro

Working Capital - USD
Pre-payment
Others

(38,192)
(936,809)
-

(44,119)
(2,712,803)
-

(198,295)
(916,307)
(4,213,104)
(418,475)

(183,304)
(314,060)
(3,971,327)
(357,182)

Total

(975,001)

(2,756,922)

(5,746,181)

(4,825,873)

FINAME
BNDES Automatic
CDC

(360,704)
(11,898)

(303,606)
(1,222)
(7,214)

(398,385)
(11,898)

(333,905)
(1,222)
(7,214)

Total

(372,602)

(312,042)

(410,283)

(342,341)

NCE / Compror / Others

CDB-DI
Investment funds, LCA-DI and national treasury bill
Total
Liabilities exposure to LIBOR/EURIBOR rate:

Liabilities exposure to TJLP rate:

Liabilities exposure to UMBNDES:

CCB - BNDES

(57,080)

Total

(57,080)

Sensitivity analysis
The Company's operations are indexed to float rates such as TJLP, CDI, Libor, Euribor and UMBNDES . Thus, in general, Management believes that any fluctuation in
interest rates, would create no significant impact on its income, so that preferably does not use derivative financial instruments to manage this risk, except in terms of
specific situations that may arise.
With the aim of providing information on sensitivity to interest rate risks to which the Company is exposed on December 31, 2014, below is a simulation of possible
changes of 25% and 50% in the relevant variables of risk in relation to the closing prices used in the measurement of assets and liabilities based on the date of these
financial statements. To calculate the effect on the result in a probable scenario, the Company deems appropriate the application of the Value at Risk analysis (VaR) for
a confidence interval of 99% and a horizon of one day. The results of this analysis are shown below:

Exposure
Contracts indexed to CDI
Contracts indexed to Libor / Euribor
Contracts indexed to TJLP

Risk
Increase on interest rate CDI
Increase on interest rate Libor / Euribor
Increase on interest rate TJLP

Effect on income - Company

Scenario (II)
Scenario (III)
Scenario (I) VaR
Interest rate
Interest rate
99% I.C. 1 day
variation - 25%
variation - 50%
(157)
(1)
(158)

(9,882)
(1,533)
(4,658)
(16,073)

(19,763)
(3,065)
(9,315)
(32,143)

58

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Effect on income - Consolidated
Scenario (II)
Scenario (III)
Scenario (I) VaR
Interest rate
Interest rate
99% I.C. 1 day
variation - 25%
variation - 50%

Risk

Exposure
Contracts indexed to CDI
Contracts indexed to Libor / Euribor

Increase on interest rate CDI

Increase on interest rate Libor / Euribor

Contracts indexed to TJLP

Increase on interest rate TJLP

Contracts indexed to UMBNDES

Increase on UMBNDES

Premises

Risk

Interest rate CDI

Interest Libor / Euribor
Interest TJLP
UMBNDES

Increase on interest rate

Increase on interest rate
Increase on interest rate
Increase on UMBNDES

(123)
(6)
-

Current Scenario

(15,373)
(18,066)

(5,129)

(10,257)

(1,031)

(14,270)

(28,540)

(1,160)

(36,119)

(72,236)

Scenario (I) VaR

99% I.C. 1 day

11.5700%
0.6288%
5.0000%
0.0518

(7,687)
(9,033)

11.6161%
0.6289%
5.0000%
0.0528

Scenario (II)
Variation - 25%

Scenario (III)
Variation - 50%

14.4625%
0.7860%
6.2500%
0.0648

17.3550%
0.9432%
7.5000%
0.0777

a.2) Exchange rate risk of Company

Exchange rate risk is related to potentially adverse results that may arise from oscillations in this risk factor, which may be caused by economic crisis, sovereign
monetary policy alterations, or market movements. The Company has assets and liabilities exposed to foreign exchange rate, however the Financial and Commodities
Risk Management Policy does not believe in natural hedging from those opposite exposures, since other important issues like expiry matching and market volatility are
very relevant and must be observed.
The Risk Management Department applies approved hedge instruments by the Board of Directors to protect financial assets and liabilities, potential future cash flow
from commercial activities and net investments in foreign operations. Futures, NDFs (non deliverable forwards), options and swaps may be used to hedge loans,
investments, flows from interest payments, acquisition of raw material, and other flows, whenever they are quoted in currencies different than the Company's functional
currency. In the Company, the main exposures to exchange rate risk are in US Dollars (US$), Canadian Dollars (C$), Euros () and the British Pound (). In the
consolidated, the Company disclosures its exposure in relation on each indexer based on the functional currency of the country, highlighting the operations indexed to
the US Dollars (US$), in Australia, which the functional currency is Australian Dollar (AUD) and Mexico, which the functional currency is the Mexican Pesos (MXN) of
JBS USA's subsidiaries. In addition, the others JBS USA's subsidiaries also have exposures in Japanese Yen (JPY) e New Zealand Dollars (NZD), of less
representativeness.
The Board understands that quantitative figures regarding the foreign currency exposure risk of the Company on December 31, 2014 and 2013 are presented below in
accordance with the Financial and Commodities Risk Management Policy. However, in view of paragraph 35 of CPC 40 R1, it should be mentioned that during the
period there were representative movement due to hedging operations at the exchange as a result of financial and commercial operations.
Company
A) EXPOSURE in US$ (American Dollar)

December 31, 2014

Consolidated

December 31, 2013

December 31, 2014

December 31, 2013

OPERATING
Cash and cash equivalents
Trade accounts receivable
Inventories
Sales orders
Trade accounts payable
Purchase orders
Subtotal

2,178,112
2,406,882
705,399
(63,515)

1,512,407
2,960,113
39,705
753,257
(39,462)

3,448,839
3,384,133
1,271,129
(140,452)

1,933,060
4,902,755
39,705
1,100,522
(1,271,573)

(256,393)

(189,284)

5,226,878

5,226,020

7,707,256

6,515,185

FINANCIAL
Related parties transaction (net)

(14,145)

(17,320,720)

(13,863,985)

(22,299,809)

(14,965,671)

Subtotal

(17,334,865)

(13,863,985)

(22,299,809)

(14,965,671)

Total exposure

(12,107,987)

(8,637,965)

(14,592,553)

(8,450,486)

6,820,724
12,165,396
22,464
(22,758)

4,110,677
7,383,641
358,393
(360,553)

7,786,253
13,662,776
139,460
(22,758)

4,110,677
7,383,641
733,209
(360,553)

Loans and financings

DERIVATIVES
Future contracts
Non Deliverable Forwards (NDFs)
Swap (Assets)
Swap (Liabilities)
Total of derivatives
NET EXPOSURE

18,985,826

11,492,158

21,565,731

11,866,974

6,877,839

2,854,193

6,973,178

3,416,488

The Board understands that quantitative figures regarding the foreign currency exposure risk of the Company on December 31, 2014 and 2013 are presented above in
accordance with the Financial and Commodities Risk Management Policy approved by the Board of Directors.

59

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Sensitivity analysis
With the aim of providing information on sensitivity to exchange rate risks to which the Company is exposed on December 31, 2014, below is a simulation of possible
changes of 25% and 50% in the relevant variables of risk in relation to the closing prices used in the measurement of assets and liabilities based on the date of these
financial statements. To calculate the effect on the result in a probable scenario, the Company deems appropriate the application of the Value at Risk analysis (VaR) for
a confidence interval of 99% and a horizon of one day. The results of this analysis are shown below:

Exchange rate risk (US$)

Effect on income - Company

Exposure of R$ (Real) - Company

Risk

Financial

R$ depreciation

Operating

R$ appreciation

Hedge derivatives

R$ appreciation

Scenario (I) VaR

99% I.C. 1 day

Scenario (II) Rate

variation - 25%

Scenario (III) Rate

variation - 50%

(343,278)

(4,334,043)

(8,667,433)

103,506

1,306,818

2,613,439

375,971

41,067,505

9,492,913

136,199

38,040,280

3,438,919

Effect on income - Consolidated

Exposure of R$ (Real) - Consolidated

Risk

Financial

R$ depreciation

Operating

R$ appreciation

Hedge derivatives

R$ appreciation

Premises

Scenario (I) VaR

99% I.C. 1 day

Current Scenario

Depreciation of the R$ against dollar

Scenario (II) Rate

variation - 25%

Scenario (III) Rate

variation - 50%

(441,597)

(5,575,372)

(11,149,905)

152,625

1,926,959

3,853,628

427,060

5,391,839

10,782,866

138,088

1,743,426

3,486,589

Scenario (I) VaR

99% I.C. 1 day

2.6562

2.7088

3.3203

December 31, 2013

December 31, 2014

Company
B) EXPOSURE in C$ (Canadian Dollar)

December 31, 2014

Scenario (II)
Variation - 25%

Scenario (III)
Variation - 50%
3.9843

Consolidated
December 31, 2013

OPERATING
Cash and cash equivalents
Trade accounts receivable
Trade accounts payable

3,274
1,165
(10)

1,357
-

3,277
10,217
(10)

1
4,197
-

Subtotal

4,429

1,357

13,484

4,198

Total exposure

4,429

1,357

13,484

4,198

DERIVATIVES
Future contracts
Non Deliverable Forwards (NDFs)
Total of derivatives

(4,126)
-

(4,126)
(32,360)

(4,126)

(36,486)

1,357

(23,002)

4,198

303

NET EXPOSURE
Sensitivity analysis

With the aim of providing information on sensitivity to exchange rate risks to which the Company is exposed on December 31, 2014, below is a simulation of possible
changes of 25% and 50% in the relevant variables of risk in relation to the closing prices used in the measurement of assets and liabilities based on the date of these
financial statements. To calculate the effect on the result in a probable scenario, the Company deems appropriate the application of the Value at Risk analysis (VaR) for
a confidence interval of 99% and a horizon of one day. The results of this analysis are shown below:

Exchange rate risk (C$ - Canadian Dollar)

Exposure of R$ (Real) - Company

Effect on income - Company

Risk

Scenario (I) VaR

99% I.C. 1 day

Scenario (II) Rate

variation - 25%

Scenario (III) Rate

variation - 50%

Operating

R$ appreciation

82

1,107

2,215

Hedge derivatives

R$ depreciation

(76)

(1,032)

(2,063)

75

152

60

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Effect on income - Consolidated
Exposure of R$ (Real) - Consolidated

Scenario (I) VaR

99% I.C. 1 day

Risk

Scenario (II) Rate

variation - 25%

Scenario (III) Rate

variation - 50%

Operating

R$ appreciation

249

3,371

6,742

Hedge derivatives

R$ depreciation

(675)

(9,122)

(18,243)

(426)

(5,751)

(11,501)

Premises

Current Scenario

Depreciation of the R$ against Canadian dollar

Scenario (I) VaR

99% I.C. 1 day

2.2920

2.3344

2.8650

December 31, 2013

December 31, 2014

Company
C) EXPOSURE in (EURO)

December 31, 2014

Scenario (II)
Variation - 25%

Scenario (III)
Variation - 50%
3.4380

Consolidated
December 31, 2013

OPERATING
43,904
43,671
1,505
(18,965)

Cash and cash equivalents

Trade accounts receivable
Sales orders
Trade accounts payable
Purchase orders

73,890
128,347
269,236
(20,095)

44,061
73,603
3,153
(30,384)

74,581
142,536
269,236
(21,062)

(9,898)

70,115

451,378

80,535

465,291

Loans and financings

706,148

682,187

Subtotal

706,148

682,187

70,115

451,378

786,683

1,147,478

Subtotal
FINANCIAL

Total exposure
DERIVATIVES
Future contracts
Non Deliverable Forwards (NDFs)
Total of derivatives
NET EXPOSURE

32,270

(282,619)

48,405

(282,619)

(161,325)

(1,474)

(161,325)

32,270

(443,944)

46,931

(443,944)

102,385

7,434

833,614

703,534

Sensitivity analysis
With the aim of providing information on sensitivity to exchange rate risks to which the Company is exposed on December 31, 2014, below is a simulation of possible
changes of 25% and 50% in the relevant variables of risk in relation to the closing prices used in the measurement of assets and liabilities based on the date of these
financial statements. To calculate the effect on the result in a probable scenario, the Company deems appropriate the application of the Value at Risk analysis (VaR) for
a confidence interval of 99% and a horizon of one day. The results of this analysis are shown below:

Exchange rate risk ( - EURO)

Exposure of R$ (Real) - Company

Effect on income - Company

Scenario (I) VaR
Scenario (II) Rate Scenario (III) Rate
99% I.C. 1 day
variation - 25%
variation - 50%

Risk

Operating

R$ appreciation

1,521

17,530

Hedge derivatives

R$ appreciation

700

8,068

35,058
16,135

2,221

25,598

51,193

Effect on income - Consolidated

Scenario (I) VaR
Scenario (II) Rate Scenario (III) Rate
99% I.C. 1 day
variation - 25%
variation - 50%

Exposure of R$ (Real) - Consolidated

Risk

Operating
Financial

R$ appreciation

1,747

20,135

40,268

R$ appreciation

15,318

176,548

353,074

Hedge derivatives

R$ appreciation

Premises
Depreciation of the R$ against euro

Current Scenario
3.2270

1,018

11,733

23,466

18,083

208,416

416,808

Scenario (I) VaR

99% I.C. 1 day
3.2970

Scenario (II)
Variation - 25%

Scenario (III)
Variation - 50%

4.0338

4.8405

61

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Company
D) EXPOSURE in (British Pound)

December 31, 2014

Consolidated

December 31, 2013

December 31, 2014

December 31, 2013

OPERATING
49,969
1,149
(195)

1,853
49,840
54,542
-

4,126
104,154
97,186
(195)

3,820
102,609
97,736
-

Subtotal

50,923

106,235

205,271

204,165

Total exposure

50,923

106,235

205,271

204,165

(21,738)

(105,404)

Cash and cash equivalents

Trade accounts receivable
Sales orders
Trade accounts payable

DERIVATIVES
Future contracts
Non Deliverable Forwards (NDFs)

(103,513)

Total of derivatives

(125,251)

NET EXPOSURE

(105,404)

(74,328)

831

(31,158)

(105,404)

(186,025)

(217,183)

(105,404)

(11,912)

98,761

Sensitivity analysis
With the aim of providing information on sensitivity to exchange rate risks to which the Company is exposed on December 31, 2014, below is a simulation of possible
changes of 25% and 50% in the relevant variables of risk in relation to the closing prices used in the measurement of assets and liabilities based on the date of these
financial statements. To calculate the effect on the result in a probable scenario, the Company deems appropriate the application of the Value at Risk analysis (VaR) for
a confidence interval of 99% and a horizon of one day. The results of this analysis are shown below:

Exchange rate risk (British Pound)

Effect on income - Company

Scenario (I) VaR
99% I.C. 1 day

Scenario (II) Rate

variation - 25%

Scenario (III) Rate

variation - 50%

Exposure of R$ (Real) - Company

Risk

Operating
Hedge derivatives

R$ appreciation

1,032

12,730

25,462

R$ depreciation

(2,538)

(31,312)

(62,627)

(1,506)

(18,582)

(37,165)

Effect on income - Consolidated

Scenario (I) VaR
99% I.C. 1 day

Scenario (II) Rate

variation - 25%

Scenario (III) Rate

variation - 50%

Exposure of R$ (Real) - Consolidated

Risk

Operating
Hedge derivatives

R$ appreciation

4,159

51,317

102,638

R$ depreciation

(4,401)

(54,294)

(108,594)

(242)

(2,977)

(5,956)

Premises

Current Scenario

Depreciation of the R$ against British pound

4.1405

Scenario (I) VaR

99% I.C. 1 day
4.2244

Scenario (II)
Variation - 25%

Scenario (III)
Variation - 50%

5.1756

6.2108

a.2.1) Position balance in foreign exchange futures

US$ (American Dollar)
December 31, 2014
Future Contracts - BM&F
Risk factor
US$ (American Dollar)
DDI

Instrument
Future
Future

Nature
Long
Long

Quantity
14,760
36,597

Notional

Market value

1,960,276
4,860,448

(33,215)
(117,438)

6,820,724

(150,653)

December 31, 2013

Future Contracts - BM&F
Risk factor
US$

Instrument
Future

Nature
Long

Quantity
35,095

Notional

Market value

4,110,677

37,476

4,110,677

37,476

62

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
C$ (Canadian Dollar)
December 31, 2014
Future Contracts - BM&F
Risk factor

Instrument

Canadian Dollar

Future

Nature

Quantity

Notional
30

Short

Market value

(4,126)

71

(4,126)

71

(EURO)
December 31, 2014
Future Contracts - BM&F
Instrument

Risk factor
Euro

Future

Nature

Quantity

Long

Notional
200

Market value

32,270

(601)

32,270

(601)

December 31, 2013

Future Contracts - BM&F
Instrument

Risk factor
Euro

Future

Nature
Short

Quantity

Notional

1,720

Market value

(282,619)

(2,693)

(282,619)

(2,693)

(British Pound)
December 31, 2014
Future Contracts - BM&F
Instrument

Risk factor
British Pound

Future

Nature

Quantity

Long

Notional
150

Market value

(21,738)

404

(21,738)

404

December 31, 2013

Future Contracts - BM&F
Instrument

Risk factor
British Pound

Future

Nature
Short

Quantity

Notional
766

Market value

(105,404)

(928)

(105,404)

(928)

a.2.2) Position Balance in foreign exchange swaps

Swaps are derivatives used to hedge net exchange exposures of assets and liabilities of the Company and its subsidiaries and are classified as financial assets or
liabilities measured at fair value through profit or loss.
Swap (US$)
Initial date Swap

Feb 3, 2009

Initial date Swap

Feb 3, 2009
Aug 22, 2013
May 29, 2013

Notional US$

Notional R$

26,317

69,903

26,317

69,903

Notional US$

Notional R$

26,317
25,000
100,000

61,650
58,565
234,260

151,317

354,475

Expiry date

Feb 4, 2015

Expiry date

Feb 4, 2015
Aug 27, 2014
Sep 05, 2014

Fair value
(receivable) - R$

Fair value (payable) R$

December 31, 2014

22,464

(22,758)

(294)

22,464

(22,758)

(294)

Fair value
(receivable) - R$

Fair value (payable) R$

December 31, 2013

60,994
59,573
237,826

(62,387)
(59,680)
(238,486)

(1,393)
(107)
(660)

358,393

(360,553)

(2,160)

63

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
a.2.3) NDF's (Non deliverable forwards)
US$ (American Dollar)
Risk factor

Instrument

Dollar

NDF

Nature

Notional - USD

Long

Notional - R$

December 31, 2014

December 31, 2013

4,580,000

12,165,396

(147,741)

119,380

4,580,000

12,165,396

(147,741)

119,380

(EURO)
Risk factor

Instrument

Euro

NDF

Nature

Notional -

Short

Notional - R$

December 31, 2014

December 31, 2013

(6,831)

(6,831)

(British Pound)
Risk factor

Instrument

British Pound

NDF

Nature

Notional -

Short

Notional - R$

December 31, 2014

(25,000)

(103,513)

(2,903)

(25,000)

(103,513)

(2,903)

December 31, 2013

a.4) Commodity price risk

The Company is a global player in different areas related to the Agribusiness (the entire livestock protein chain, biodiesel, among others) and the regular course of its
operations brings exposures to price oscillations in feeder cattle, live cattle, lean hogs, corn, soybeans, and energy, especially in the American, Australian and Brazilian
markets. Commodity markets are characterized by volatility arising from external factors like climate, supply levels, transportation costs, agricultural policies, storage
costs, among others. The Risk Management Committee is responsible for mapping the exposures to commodity prices of the Company and its subsidiaries and
propose strategies to the Risk Management Committee, in order to mitigate such exposures.
A very important part of the raw materials needs of the Company and its subsidiaries are biological assets sensitive to stockpiling. In order to maintain future supply of
these materials the Company contracts anticipated purchases from suppliers. To complement this purchase, ensuring minimum price and volume to the materials
purchased for a planning horizon pre-defined by the Risk Management Committee and approved by the Board of Directors, as well as aiming at mitigating price
oscillations risks on inventories and sales contracts, the Company and its subsidiaries use hedging instruments specific for each exposure, most notably futures
contracts. The Company deems appropriate to take the average amount spent with materials as a parameter indicative of operational value to be protected by firm
contracts.
a.4.1) Position balance in commodities (cattle) contracts of the Company
The field of activity of the Company is exposed to volatility in cattle prices, which changes arise from factors beyond the Company's control, such as climate, the supply
volume, transportation costs, agricultural policies and others. The Company, in accordance with its policy of stock management, maintains its strategy of risk
management, based on physical control, which includes anticipated purchases, combined with future market operations, and reducing the daily position of anticipated
purchases contracts for future delivery through future contracts of cattle on BM&F, aimed at bringing the position to zero and ensuring the market price.
The parameters for reducing the cattle purchase risk are based on the physical position of term contracts of cattle purchase considering negotiated values and terms.
The internal controls used for coverage and risk management are made through spreadsheets and monitoring of operations performed and calculation of VAR for 1
day, with a confidence interval of 99%.
The Company understands that quantitative figures regarding the exposure risk on the cattle's arroba (15kg) price changes of the Company on December 31, 2014 and
2013 are presented below in accordance with the Financial and Commodities Risk Management Policy and are representative of the exposure incurred during the
period in accordance with paragraph 35 of CPC 40 R1.
EXPOSURE
Firm Contracts of cattle purchase
TOTAL

December 31, 2014

December 31, 2013

36,953

36,241

36,953

36,241

Composition of derivative financial instruments to hedge of cattle purchase price

Derivative

Maturity

Receivable

Payable

Counterpart of the
principal amount

Future contracts
(BM&F)

January, 2015 to
October, 2015

R$

Cattle @ (15 kg)

BM&F

Reference value
(notional R$)

Market Value R$

(25,871)

(25,871)

Sensitivity analysis
Price risk of cattle purchase

Effect on income - Company

Scenario (I) VaR
99% I.C. 1 day

Scenario (II) @
Variation - 25%

Scenario (III) @
Variation - 50%

Exposure

Risk

Operational

@ (15kg) Depreciation

355

9,238

18,477

Hedging derivatives of cattle @ (15kg) price

@ (15kg) Appreciation

(248)

(6,468)

(12,936)

107

2,770

5,541

64

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Premises

Current Scenario

Scenario (I) VaR

99% I.C. 1 day

147.1300

148.5416

Appreciation of the price quote of @ (15kg)

Scenario (II) @
Variation - 25%

Scenario (III) @
Variation - 50%

183.9125

220.6950

The exposure operating risk in firm contracts of cattle purchase is the rise of cattle arroba price, thereby, it is calculated the risk of market price appreciation of the
cattle market price.
a.4.2) Position balance in commodities (corn) derivatives financial instruments of the Company
The business segment of the Company in its division Confinamento and its subsidiary JBS Foods S.A. is exposed to price volatility of corn, which changes arise from
factors beyond the Company's control, such as climate, the supply volume, transportation costs, agricultural policies and others.
The Company, in accordance with its policy of inventory management, started the strategy of risk management of corn's price based on physical control, including
expectations of future consumption, anticipated purchases, combined with future market operations, by hedging with corn futures on BM&F, in order to guarantee the
market price.
The internal controls used for coverage and risk management are made through spreadsheets and monitoring of operations performed and calculation of VAR for 1
day, with a confidence interval of 99%.
The Company understands that quantitative figures regarding the exposure risk on the corn's sacks price changes of the Company on December 31, 2014 and 2013
are presented below in accordance with the Financial and Commodities Risk Management Policy. On December 31, 2014 the Company had no position balance of
derivatives financial instruments related to the commodity price risk of corn.
a.4.3) Position balance in commodities derivatives financial instruments of JBS USA
The Company understands that quantitative figures regarding the exposure risk of the commodities' price changes of the subsidiary JBS USA on December 31, 2014
and 2013 are presented below in accordance with the Financial and Commodities Risk Management Policy and are representative of exposure incurred during the
period in accordance with paragraph 35 of CPC 40 R1.
JBS USA subsidiary
EXPOSURE

December 31, 2014

December 31, 2013

OPERACIONAL
Forwards - commodities

(3,936,680)

(7,129,630)

Subtotal

(3,936,680)

(7,129,630)

Future and option commodity contracts

5,662,129

4,840,304

Subtotal

5,662,129

4,840,304

TOTAL EXPOSURE

1,725,449

(2,289,326)

DERIVATIVES

Sensitivity analysis
Commodities risk JBS USA

Effect on income - JBS USA subsidiary

Exposure

Risk

Scenario (I) VaR

99% I.C. 1 day

Scenario (II) Price

variation - 25%

Scenario (III)
Price Variation 50%

Operational

Commodities price depreciation

(55,445)

(984,170)

(1,968,340)

Hedging derivatives

Commodities price appreciation

79,746

1,415,532

2,831,064

24,301

431,362

862,724

Scenario (I) VaR

99% I.C. 1 day

Premises
Increase of commodities price

1.408%

Scenario (II)
Variation - 25%

Scenario (III)
Variation - 50%

25.000%

50.000%

b) Credit risk
The Company and its subsidiaries are potentially subject to credit risk related to accounts receivable, investments and hedging contracts. The Financial and
Commodities Risk Management Policy understands that the diversity of the portfolio contributes significantly to reduce the credit risk, but parameters are set to
operations where credit is provided, observing financial ratios and operational health, as well as consults to credit monitoring entities.
In case of the counterparty of a financial operation is a financial institution (investments and hedging contracts), the Company employs exposure limits set by the Risk
Management Committee and approved by the Board of Directors, based on risk ratings (ratings) of specialized international agencies.
Amounts invested in private bonds (notably bank certificates of deposit) and accumulated fair values receivables in hedging transactions contracted with banks, must
comply with the following table limits, in order that, the total volume does not exceed a specified percentage of the equity of the financial institution (% Equity). In
conjunction, the maturity of the application should be no longer than the maximum horizon.
Category
Triple A
Double A
Single A
Triple B

% Equity
2.00%
1.00%
0.50%
0.25%

Maximum
horizon
5 years
3 years
2 years
1 year

65

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Observations:
In case of different ratings for the same financial institution, must adopt the most conservative;
The associates banks should be consolidated at its headquarters;
Financial institutions without rating are not eligible;
In the absence of rating in the national scale, use the global rating scale;
If the Company holds debt and applications with particular counterparty, the net value of the transactions should be considered;
Exceptions can occur if previously approved by the Risk Management Committee and Executive Board.
Besides private bonds, the Company can also invest funds in federal national treasury bill: LFT, LTN, NTN-F and NTN-B. For these cases there is no pre-established
limits. It is also permitted to invest in fixed income funds of low risk that have policy of investment applications in assets directly related to the basic interest rate
(SELIC).
The book value of financial assets that represent the maximum exposure to credit risk at the financial statement date was:
Company
Note

December 31, 2014

Consolidated

December 31, 2013

December 31, 2014

December 31, 2013

Assets
Cash and cash equivalents

9,503,923

5,223,978

14,910,427

9,013,147

Trade accounts receivable

3,502,612

4,087,073

9,577,548

8,919,926

Credits with related parties

10

Trade accounts receivable, net

Current receivables
Overdue receivables:
From 1 to 30 days
From 31 to 60 days
From 61 to 90 days
Above 90 days
Allowance for doubtful accounts

3,301,146

1,784,948

370,072

733,958

16,307,681

11,095,999

24,858,047

18,667,031

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

3,265,933

3,981,264

8,305,274

7,866,991

229,464
14,696
20,906
60,198

111,388
9,527
2,990
70,489

1,085,777
127,764
59,952
191,148

840,843
109,287
80,982
232,266

(88,585)
236,679

(88,585)
105,809

(192,367)
1,272,274

(210,443)
1,052,935

9,577,548

8,919,926

Company

3,502,612

Consolidated

4,087,073

c) Liquidity risk
Liquidity risk arises from the management of working capital of the Company and its subsidiaries and amortization of financing costs and principal of the debt
instruments. It is the risk that the Company and its subsidiaries will find difficulty in meeting their financial obligations falling due.
The Company and its subsidiaries manage their capital based on parameters optimization of capital structure with a focus on liquidity and leverage metrics that enable a
return to shareholders over the medium term, consistent with the risks assumed in the transaction.
The Management of the Company's liquidity is done taking into account mainly the acid test ratio, represented by the level of cash plus investments divided by shortterm debt. It is also maintained a focus on managing the overall leverage of the Company and its subsidiaries to monitor the ratio of net debt to "EBITDA" at levels we
considered to be manageable for continuity of operations.
Based on the analysis of these indicators, the management of working capital has been defined to maintain the natural leverage of the Company and its subsidiaries at
levels equal to or less than the leverage ratio that the Company would like to achieve.
The index of liquidity and leverage consolidated are shown below:
Consolidated
Cash and cash equivalents
Loans and financings - Current
Acid test ratio
Leverage indicator

December 31, 2014

December 31, 2013

14,910,427
13,686,975
1.09

9,013,147
9,430,892
0.96

2,1x

3,7x

To calculate the leverage indicator the Company used the dollar and the euro correction rates of the last day of the year (closing rate). This criteria is intended to
equalize the net debt and EBITDA at the same exchange rate.

66

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
The table below shows the fair value of financial liabilities of the Company and its subsidiaries according to their maturities:
December 31, 2014
Company
Trade accounts payable
Debits with related parties
Loans and financings
Derivatives financing (liabilities) assets
TOTAL

Less than 1 year

Between 1 and 2
years

Between 3 and 5
years

More than 5 years

Fair Value

(1,567,402)
(9,567,475)
(279,890)

(3,276,569)
-

(3,639,882)
-

(140,695)
(6,772,633)
-

(1,567,402)
(140,695)
(23,256,559)
(279,890)

(11,414,767)

(3,276,569)

(3,639,882)

(6,913,328)

(25,244,546)

December 31, 2013

Less than 1 year

Between 1 and 2
years

Between 3 and 5
years

More than 5 years

Fair Value

Trade accounts payable

Loans and financings
Derivatives financing (liabilities) assets

(1,371,205)
(6,839,122)
(9,958)

(2,514,791)
(247)

(6,972,220)
-

(4,266,838)
-

(1,371,205)
(20,592,971)
(10,205)

TOTAL

(8,220,285)

(2,515,038)

(6,972,220)

(4,266,838)

(21,974,381)

December 31, 2014

Consolidated
Trade accounts payable
Loans and financings
Derivatives financing (liabilities) assets
TOTAL

Less than 1 year

Between 1 and 2
years

(6,942,933)
(13,686,975)

(4,625,423)

(241,899)
(20,871,807)

Between 3 and 5
years

(6,881,514)

(4,625,423)

More than 5 years

(14,885,228)

(6,881,514)

Fair Value

(6,942,933)
(40,079,140)

(14,885,228)

(241,899)
(47,263,972)

December 31, 2013

Less than 1 year

Trade accounts payable

Loans and financings
Derivatives financing (liabilities) assets
TOTAL

Between 1 and 2
years

Between 3 and 5
years

More than 5 years

Fair Value

(5,342,388)
(9,430,892)
(12,311)

(3,000,141)
(560)

(10,671,253)
(1,413)

(9,659,055)
-

(5,342,388)
(32,761,341)
(14,284)

(14,785,591)

(3,000,701)

(10,672,666)

(9,659,055)

(38,118,013)

d) Estimated market values

The assets and liabilities are represented in the financial statements at cost and their appropriations of revenues and expenses are accounted for in accordance with its
expected realization or settlement.
The market values of non-derivative financial instruments and derivatives were estimated based on information available on the market.
e) Guarantees provided and guarantees received
Guarantees provided
The Company has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at December 31, 2014 is R$ 1,122,266
(R$ 551,303 at December 31, 2013). This guarantee is superior to the need presented for these operations.
The indirect subsidiary JBS USA and its subsidiaries, has securities pledged as collateral for derivative transactions with the commodities and futures whose balance at
December 31, 2014 is R$ 316,088 (R$ 226,829 at December 31, 2013). This guarantee is superior to the need presented for these operations.
Other guarantees considered relevant are described in detail in the notes: 15 - Loans and financings, and 16 - Credit operations, guarantees and covenants.
Guarantees received
The Company and its subsidiaries have no guarantees received from third parties deemed relevant.

67

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
f) Financial instruments
All transactions with financial instruments are recognized in financial statements as described below:
Company
Notes

Consolidated

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

5,314,674

3,434,724

6,541,899

4,299,778

5
6
10

4,189,249
3,502,612
3,301,146

1,789,254
4,087,073
1,784,948

8,368,528
9,577,548
370,072

4,713,369
8,919,926
733,958

16,307,681

11,095,999

24,858,047

18,667,031

Assets
Fair value through profit or loss
Financial investments
Loans and receivables
Cash and banks
Trade accounts receivable
Credits with related parties
Total
Liabilities
Liabilities at amortized cost
Loans and financings

15/16

(23,256,559)

(20,592,971)

(40,079,140)

(32,761,341)

Trade accounts payable

14

(1,567,402)

(1,371,205)

(6,942,933)

(5,342,388)

Debits with related parties

10

(140,695)

Fair value through profit or loss

Payables derivatives
Total

(279,890)

(10,205)

(241,899)

(14,284)

(25,244,546)

(21,974,381)

(47,263,972)

(38,118,013)

During this year there has been no reclassification between categories, fair value through profit or loss, loans and receivables and liabilities at amortized cost, shown in
the table above.
g) Fair value of financial instruments
The assets and liabilities are represented in the financial statements at cost and their appropriations of revenues and expenses are accounted for in accordance with its
expected realization or settlement. The future derivatives fair values are calculated based on daily settlements as a result of changes in market prices of futures and
commodities. The swap is obtained by calculating independently the assets and liabilities legs, bringing them to present value. The future prices used to calculate the
curve of the contracts were drawn from the Bloomberg database.
In accordance to CPC 40 R1/IFRS 7 - Financial Instruments: Disclosures, the Company and its subsidiaries classify fair value measurements in accordance with the
hierarchical levels that reflect the significance of the indices used in this measurement, according to the following levels
Level 1 - Quoted prices in active markets (unadjusted) for identical assets or liabilities;
Level 2 - Inputs other than Level 1, in which prices are quoted for similar assets and liabilities, either directly by obtaining prices in active markets or indirectly as
valuation techniques that use data from active markets.
Level 3 - Indices used for calculation are not derived from an active market. The Company and its subsidiaries do not have this level of measurement instruments.
As noted above, the fair values of financial instruments, except for those maturing in the short term, equity instruments with no active market and contracts with
discretionary features that fair value can not be reliably measured, are presented in hierarchical levels of measurement below:
Fair value hierarchy
December 31, 2014
Company
Level 1

Level 2

Level 3

Current assets
National treasury bill - LFT

804,738
-

Financial investments

4,509,936

Current liabilities
-

Payables derivatives

(279,890)

Consolidated
Level 1

Level 2

Level 3

Current assets
National treasury bill - LFT
Financial investments

1,766,650
-

4,775,249

Current liabilities
Payables derivatives

(241,899)

68

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
December 31, 2013
Company
Level 1

Level 2

Level 3

Current assets
286,719

National treasury bill - LFT

Financial investments

3,148,005

Current liabilities
-

Payables derivatives

(10,205)

Consolidated
Level 1

Level 2

Level 3

Current assets
1,063,744

National treasury bill - LFT and Financial investments

Financial investments

3,236,034

Current liabilities
-

Payables derivatives

(14,284)

Fair value versus book value

The fair values of financial assets and liabilities, with the book values presented in the balance sheet position are as follows:
December 31, 2014
Company
Cash and banks
Financial investments
Trade accounts receivable
Related parties receivable

Note

5
5
6
10

Total financial assets

Trade accounts payable
Debits with related parties
Derivatives
Loans and financings
Declared dividends
Payables related to facilities acquisitions

14
10
15/16
19
20

Total financial liabilities

Book value

Fair value

Cash and banks

Financial investments
Trade accounts receivable
Related parties receivable

Note

5
5
6
10

Total financial assets

Trade accounts payable
Derivatives
Loans and financings
Declared dividends
Payables related to facilities acquisitions
Total financial liabilities

14
15/16
19
20

Fair value

4,189,249
5,314,674
3,502,612
3,301,146

4,189,249
5,314,674
3,502,612
3,301,146

1,789,254
3,148,005
4,087,073
1,784,948

1,789,254
3,148,005
4,087,073
1,784,948

16,307,681

16,307,681

10,809,280

10,809,280

(1,567,402)
(140,695)
(279,890)
(23,256,559)
(484,013)
(92,798)

(1,567,402)
(140,695)
(279,890)
(23,256,559)
(484,013)
(92,798)

(1,371,205)
(10,205)
(20,592,971)
(220,494)
(158,607)

(1,371,205)
(10,205)
(20,592,971)
(220,494)
(158,607)

(25,821,357)

(25,821,357)

(22,353,482)

(22,353,482)

(9,513,676)

(9,513,676)

(11,544,202)

(11,544,202)

December 31, 2014

Consolidated

December 31, 2013

Book value

Book value

Fair value

December 31, 2013

Book value

Fair value

8,368,528
6,541,899
9,577,548
370,072

8,368,528
6,541,899
9,577,548
370,072

4,713,369
3,236,034
8,919,926
733,958

4,713,369
3,236,034
8,919,926
733,958

24,858,047

24,858,047

17,603,287

17,603,287

(6,942,933)
(241,899)
(40,079,140)
(484,013)
(835,342)

(6,942,933)
(241,899)
(40,079,140)
(484,013)
(835,342)

(5,342,388)
(14,284)
(32,761,341)
(220,494)
(727,749)

(5,342,388)
(14,284)
(32,761,341)
(220,494)
(727,749)

(48,583,327)

(48,583,327)

(39,066,256)

(39,066,256)

(23,725,280)

(23,725,280)

(21,462,969)

(21,462,969)

The loans and financing presented in the table above include the values of working capital in Reais and working capital in foreign currency (bonds), as shown in detail
in notes 15 and 16. In the Management opinion the loans and financing, which are measured at their amortized cost values do not present significant variation regarding
to their fair values. These loans and financing are restated with bases in contracted rates and interest through the date of closing of financial statements, the
outstanding balance is recognized by an amount close to fair value. Since there is no active market for such instruments, the differences that could occur if these values
were for amounts paid in advance would be unrepresentative.

69

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)
Consolidated

Company
2014

2013

2014

2013

Fair value through profit or loss

Loans and receivables
Liabilities at amortized cost

1,174,324
314,355
(4,279,773)

944,553
316,320
(2,909,706)

1,974,768
314,464
(5,809,854)

1,036,903
432,538
(3,849,772)

Total

(2,791,094)

(1,648,833)

(3,520,622)

(2,380,331)

Gains (losses) by category of financial instrument

* * * * *
EXECUTIVE BOARD
Wesley Mendona Batista
Chief Executive Officer

Eliseo Santiago Perez Fernandez

Administrative and Control Officer

Jeremiah Alphonsus OCallaghan

Investor Relations Officer

Francisco de Assis e Silva

Institutional Relations Executive Officer

Agnaldo dos Santos Moreira Jr.

Accountant CRC SP: 244207/O-4

BOARD OF DIRECTORS
Joesley Mendona Batista
Chairman

Wesley Mendona Batista

Vice-Chairman

Jos Batista Sobrinho

Humberto Junqueira de Farias

Carlos Alberto Caser

Joo Carlos Ferraz

Marcio Percival Alves Pinto

Tarek Mohamed Noshy Nasr Mohamed Farahat

FISCAL COUNCIL REPORT

The Fiscal Council, in compliance with the legal and statutory requirements, reviewed the Annual Management Report and the financial statements of the Company for
the period ended on December 31, 2014 and approved by the Board of Directors of the Company on March 9, 2015.
Based on our review, information and clarification received during the year and considering the Independent Auditors Review issued unqualified opinion by BDO RCS
Auditores Independentes SS, dated on March 9,2015, the Fiscal Council expresses the opinion that the documents are in conditions to be appreciate by the Ordinary
and Extraordinary Shareholders Meeting
So Paulo, March 9, 2015.

Florisvaldo Caetano de Oliveira

Chairman

Jos Paulo da Silva Filho

Member

Demetrius Nichele Macei

Member

Amoreti Franco Gibbon

Member

70

JBS S.A.
Notes to the financial statements for the years ended on December 31, 2014 and 2013
(Expressed in thousands of reais)

STATEMENT OF OFFICERS ON THE FINANCIAL STATEMENTS AND ON THE INDEPENDENT AUDITORS REVIEW REPORT
The Company's Officers declare for the purposes of Article 25, paragraph 1, item V and VI of CVM Instruction No. 480 of December 7, 2009, that:
(i) They reviewed, discussed and agreed with the views expressed in the review report of the independent auditors on the financial statements for the period ended on
December 31, 2014, and
(ii) They reviewed, discussed and agreed with the financial statements for the period ended on December 31, 2014.
So Paulo, March 9, 2015.
Wesley Mendona Batista
Chief Executive Officer

Eliseo Santiago Perez Fernandez

Administrative and Control Officer

Jeremiah Alphonsus O'Callaghan

Investor Relations Officer

Francisco de Assis e Silva

Institutional Relations Executive Officer

* * * * *

71